(Bloomberg) —
A key U.K. power cable knocked out by a fire will stay partly offline until March, National Grid Plc said, deepening the energy crisis threatening Britain as it heads into winter.
The timing couldn’t be worse. The U.K. is already struggling with shortages, with gas and power prices breaking records day after day. The energy crunch is fueling concerns about inflation and a potential hit to businesses just as the economy emerges from the worst impact of the pandemic. How the U.K. fares through the winter now hinges in large part on the weather.
Britain is a net importer of power, with France its biggest supplier via connectors that run across the English Channel. One was shut down by a major fire at a U.K. power converter station on Wednesday, which has been blazing since just after midnight. The equivalent of about two nuclear power stations is now down.
- A total of 3,000 megawatts come in via the cables from France.
- 1,000 MW hasn’t been affected at all — the so-called IFA-2 cable
- Of the remaining 2,000 MW from the IFA-1 cable, half will stay offline until March; National Grid says the other half could come back from Sept. 25
Gas traders focused on the grid’s prediction that at least part of capacity would come back later this month. Gas prices had rallied more than 20% earlier on concerns the outage would have a knock-on effect on demand. They fell after the update.
Winter power prices also eased, closing at 178 pounds ($246) a megawatt-hour after earlier rising to a record 200 pounds, broker data showed.
Read more: U.K.’s Record-Breaking Energy Crunch Explained in Five Charts
The U.K.’s crunch is part of broader energy crisis in Europe, which has prompted governments to start taking action to ease the impact on consumers. Spain, Greece, France and Italy are all considering or enacting measures as households brace for a surge in bills. Goldman Sachs has warned of the risk of blackouts for industry.
Read: EDF Halts New Trading With U.K. Businesses on Power Price Spike
The accident in the converter comes just as windless weather has also left the U.K. without another major source of power. Nuclear outages are adding to the shortage and coal sites have been decommissioned, removing backup capacity.
National Grid sounded an early warning back in July that the U.K.’s ability to meet peak demand would be smaller this year. In one scenario they modeled — with one interconnector knocked out and high demand — margins would be the tightest in years.
Read: BNEF’s research on the energy crisis
The rest of Europe is on edge too, with the continent running out of time to refill gas storage sites before it gets cold. Flows from top suppliers Russia and Norway have been limited, and there’s a competition with Asia to snag liquefied natural gas cargoes. Traders betting that the controversial Nord Stream 2 pipeline linking Russia to Germany would start in the fourth quarter are likely to be disappointed.
The surge in the cost of carbon emissions — traded on exchanges in Europe and the U.K. — is also pushing up the cost of producing electricity. There’s some concern the crisis could cause a backlash against measures aimed at converting economies to greener fuels.
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