Ofgem has released a consultation paper intended to prevent a potential gas supply shortfall this winter, following claims from opposition politicians that the UK cannot guarantee demand will be met on a peak day.
The regulator's assessment is based on a very specific scenario where extreme weather pushes gas consumption to very high levels, combined with the country's biggest single source of gas going offline. In these "very rare stress conditions", Britain's gas demand could be very slightly higher than the amount the grid can supply.
However, this would only be the case if a planned reduction in the capacity of a pipeline to Europe goes ahead. Ofgem's announcement this week was intended to prevent that from happening, ensuring more than enough capacity even in these rare conditions.
What the politicians said
On social media on Thursday, shadow energy secretary Andrew Bowie said: "Sneaked out by OFGEM this morning, a warning for the first time EVER they cannot guarantee that demand will be met on a peak day in winter. Let's be clear what that means. They cannot guarantee that homes will be warm, lights come on or industry function on a peak day this winter. And why? Because of an accelerated decline in domestic gas supply from the North Sea."
Opposition leader Kemi Badenoch echoed a similar sentiment on BBC Breakfast on Friday: "Yesterday, Ofgem talked about gas demand and how we might not be able to handle a single peak day in winter."
The facts behind the scenario
Ofgem released a consultation paper on October 20 which is intended to help gas grid operator National Gas be compensated for a deal that prevents a pipeline connecting Britain to mainland Europe from reducing its capacity.
Ofgem assessed that "peak" gas demand during an extremely cold snap could reach 408 million cubic metres per day (mcm/d), based on calculations using figures since 2017. This is not the highest seen since 2017, which was 417 mcm/d during the Beast from the East in early 2018.
Supplies to the British grid come from several sources: UK North Sea production, Norwegian North Sea production, liquid natural gas (LNG) terminals, gas storage sites, and pipes connecting Britain to Belgium and the Netherlands. Ofgem assumes that between all these sources, Britain should be able to rely on up to 505 mcm/d of gas flowing into the system.
However, one of the pipes connecting Britain to Europe was previously planning to reduce its capacity by 25 mcm/d. This is what Ofgem and National Gas are now preventing. If that reduction were to take place – which it now appears it will not – potential supply would drop to 480 mcm/d, still well above the 408 mcm/d peak demand.
The rare worst-case scenario
As a precaution, Ofgem's model assumes that the biggest single source of gas – two neighbouring LNG terminals in Wales – go offline during a cold snap, removing 77 mcm/d from the supply. This is why the scenario is so rare: it needs an unusually cold snap and a major fault on the system at the same time.
In that scenario, where the pipeline reduction has happened and the two Welsh LNG terminals have gone down, Ofgem estimates supplies could be 403 mcm/d. This is somewhat lower than the estimated demand of 408 mcm/d, leaving a shortfall of 5 mcm/d.
The current consultation is part of a plan to keep the European pipeline's capacity unchanged. Over the 2020s, the capacity of Britain's two interconnectors – one abbreviated as INT and the other as BBL – has reduced significantly. The capacity of BBL was 45 mcm/d in 2020 and is today only 22 mcm/d. The capacity of INT was 73 mcm/d in 2020, falling to 61 mcm/d today. INT was planning a further 25 mcm/d reduction in October this year, which will now not happen.
Assuming INT does not reduce its capacity as planned, supplies should reach 428 mcm/d this winter even if the two Welsh LNG terminals go offline. This is more than enough to meet Ofgem's 408 mcm/d scenario, and also enough to meet demand in the event of a repeat of the Beast from the East (417 mcm/d).
What happens in an emergency
The Ofgem report does not say what the real-world impacts would be should demand be 408 mcm/d at a time when the system can only supply 403 mcm/d. However, National Gas, which runs the UK's gas grid, does lay out more detail about what would happen in a more general emergency situation.
If things get very bad, a "Network Gas Supply Emergency" could be declared. This has never before happened in British history but could lead to factories being told to reduce consumption, and households being asked to use less gas. As a last resort, household supplies might be managed.
There are other theoretical supply margins that Ofgem has decided not to include in its modelling. For instance, the one remaining LNG terminal in the scenario has a theoretical ability to supply 73 mcm/d to the grid, but the most it has actually been observed supplying in the past is 61 mcm/d. Ofgem chose this second figure as a precaution. Similarly, storage could theoretically supply up to 112 mcm/d, but Ofgem said this is not a reliable measure as it assumes all facilities are "sufficiently full and able to deliver their maximum rate simultaneously". Ofgem instead looked at the highest amount storage has supplied in the past, which was 86 mcm/d.
Ofgem sets out two reasons that supply limits might be tighter now than in the past: a reduction in the capacity of pipelines from Europe, which has happened incrementally since 2020, and a reduction in production of gas from the UK's North Sea, which Ofgem puts down to "a combination of geological and commercial factors". This is a medium-term fix that Ofgem hopes will offset some current pressures, but "does not remove the need for further measures led by Government."
