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Today's gas shortage scare stories. And even more uncomfortable truths.
That's why it's called interruptible. Doh!
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Jan 08, 2010
Today's gas shortage scare stories. And even more uncomfortable truths.
Surprisingly, most UK media coverage of gas shortage fantasies today didn't follow The Guardian's coverage of yesterday's interruptions. There were a whole bunch of interruptions in December by the way. These journalists are truly incompetent: How could The Express or Daily Mail have missed this headline
Blackout Britain Brown cuts off the gas for Christmas.They must be slipping. First up for a sane story was BBC Radio 4 today 6.15 business report. Louise Boddy of Heren was interviewed with the same analysis NHO has: Interruptible gas supplies get interrupted. Get over it.The reporter also told the interrupted customer to stop whingeing. It emerged later on even in the Telegraph that the news wasn't so dire after all.
The number of factories, power stations and other large gas users on interruptible contracts, who were told to stop using gas, has now been reduced from 95 to 27. Businesses on these contracts pay lower gas transportation charges to their supplier in return for agreeing to be interrupted at times of very high demand for gas.
Gas suppliers had asked 55 heavy users on interruptible contracts in the East Midlands, 39 in the North West and one in East Anglia to stop using gas because of high gas demand in those regions.This has now been reduced to 12 in East Midlands and 15 in the North West and is expected to drop to zero by Saturday.
The Independent was even more reasonable. How could I disagree with a story headlined:
Talk of a gas crisis is just hot air
A return to 1970s-style fuel rationing, or just a straightforward contractual arrangement? You could spin the story of National Grid diverting gas supplies from factories with interruptible contracts either way.This isn't a question of supply, but distribution. What National Grid did yesterday was put in place plans it has for when its network is operating at full capacity and can no longer keep up with demand, reducing supplies to some customers in order to prioritise the domestic market.
But the FT took the low road. I love how I can buy the FT in the most obscure parts of the world on the same day, but surely international readers can't figure out stories like this:
Gas supplies to businesses turned off
And here are the gory details of this non-story:
The number of industrial gas burners asked to reduce demand fell to 27 from 95, with 12 in the East Midlands from 55, 15 versus 39 in the northwest, and East Anglia none compared with one on Thursday.
Maybe the FT doesn't realise that there are over 2000 interruptible sites in Great Britain.
Far easier to instill fear by not noting that less 2.5% of interruptibles lost supply. Not bad I'd figure for the highest demand day ever, but why dwell on the good when you can even find both a whinger and a realist in the same organisation?
Roger Salomone of the EEF, the manufacturers’ association, said the loss of supply was particularly hard on companies that were struggling to rebuild their businesses after the recession, and sent a bad signal about the suitability of Britain as a manufacturing location.
Jeremy Nicholson, of the Energy Intensive Users Group, which represents large industrial customers, said gas supply had been “satisfactory, given the circumstances”.He pointed out that although the spot price of gas had risen sharply, reaching 56p per therm on Thursday before falling back, it was still well short of the peaks of over £2 per therm reached in 2006.
Ed didn't point out, so I will that Jeremy's actual employer is also the EEF.
And how have prices dealt with this air of catastrophe? Surely the markets will factor in the gas shortage story and rip us off big time? At least someone is acting logically. The average System Average Price so far in January is under 38 pence per therm. Hardly nosebleed territory and a lower January price than as recently as six weeks ago. Meanwhile February and onwards lost most of this week's gains yesterday and today.
The really uncomfortable truth is that domestic customers continue to pay commodity costs via fixed price that are up to three times higher than spot prices turned out. And even worse, we'll be paying higher prices for higher volumes, something that may cripple the economy for the rest of the year.
Posted at 06:11 PM in Energy Prices, Prices and Politics Permalink Comments (0) TrackBack (0)
Jan 07, 2010
That's why it's called interruptible. Doh!
It's a very crowded field, but an energy story in today's Guardian easily has to be the most poorly researched story printed for years:
Factories in the north-west of England and east Midlands are today having their energy supplies cut off for the first time in years as the severe weather and creaking power infrastructure lead to 1970s-style rationing.In the first tangible sign that fears over energy shortages are translating into supply disruption, the National Grid has withdrawn gas via suppliers such as British Gas from 94 industrial customers who have signed up to interruptible contracts in a bid to safeguard power to domestic homes.
Where do I begin to refute this?
End users CHOOSE to have interruptible contracts. They aren't foisted on them. Every single site made a decision to choose interruptible service over firm contracts.
Sites have been interrupted almost every winter I've been in the industry, which is pushing twenty years.
Interruptible supplies are used in every single gas grid going. There are over 500 interruptible sites run by the City of New York alone for example
That's why they are called interruptible! In return for lower transportation and gas cost end users buy capacity that is spare 95% plus of the year. It's called peak shaving and is a perfectly legitimate tool used worldwide.
This isn't creaking infrastructure, it's a day of highest ever demand. The system if meant to operate normal in 1 in 20 winter. Which this isn't
If you want a Rolls Royce system that works no matter what - you can pay for it every day of the fifty years you don't use that capacity.
National Grid has interrupted many more than 94. I was at lunch with a major supplier today who had 19 sites interrupted today. There are over 2000 interruptible sites.
If an interruptible site stops using gas, it switches to fuel oil. That is the commercial decision they made.
The Guardian is known as sympathetic to the Labour Party. If they have friends like this, they need no enemies.
This is the profile of this expert writer:
Terry Macalister is the energy editor of the Guardian. He has been employed at the paper and website for 10 years and previously worked at The Independent and other national titles.
Terry specialises in business, politics and the environment and has spoken at conferences in London, Stockholm and Shanghai.
He is a law graduate and was recently awarded a fellowship at Wolfson College, Cambridge, to look at energy security.
...where he probably is learning of how we're running out of gas.
Posted at 06:38 PM in Energy Prices, Prices and Politics Permalink Comments (2) TrackBack (0)