Letter from Malcolm Wicks MP,
Minister for Energy to Barbara Young, Chief Executive, Environment
Agency
I would like first of all to thank the Environment
Agency for the extremely constructive and helpful way in which
it has approached the question of fuel switching this winter.
Industrial representatives have expressed their appreciation of
the way in which enquiries from their membership have been dealt
with.
I hope that the need to respond in this way is an
issue only for this winter, in that there is reason to expect
that by next winter the gas supply-demand balance will be less
constrained than it is now; in addition, there is time before
next winter for those companies who would benefit from it, to
seek a more permanent amendment to their licence conditions to
enable a flexible response to contingencies.
However, it remains the case that gas supply this
winter is extremely tight. During November, gas had to be taken
out of storage in order to meet rising demand due to cold weather—an
increase in demand which was not matched by increases in production
from the UK Continental Shelf, imports through the Interconnector
with mainland Europe or imports of Liquefied Natural Gas through
the Isle of Grain. The Isle of Grain is now being more extensively
used, UKCS deliveries have risen and we hope to see re-filling
of storage facilities during the milder weather which is now expected
for much of December. But discussions with Interconnector capacity
holders suggest that it may well continue to be difficult to source
gas through that route, due to contractual and informational blockages
in Continental markets; UKCS deliverability is always vulnerable
to technical difficulties and adverse production conditions; and
a prolonged cold snap putting further pressure on stored stocks
early in the New Year remains a real possibility.
It therefore remains the case that it is important
to facilitate in every way possible the reduction of demand for
natural gas. To this end I am grateful for the work the Environment
Agency has already done with E.On and with RWE npower to examine
and manage the environmental consequences of increasing electricity
generation at the oil-fired power stations at Grain, Littlebrook
and Fawley. I understand that technically this increase is possible
and could save some millions of cubic metres of gas per day (assuming
that generation from this source replaces gas-fired generation
elsewhere, which should be the case given the price of gas at
present). This is a significant amount, in the context of the
overall amount of gas required each day this winter.
This letter therefore constitutes a request from
the Government that in the public interest the Environment Agency
allows an increase in generation from those oil-fired power stations,
for this winter only and to the extent that this can achieved
without causing unacceptable damage to local air quality. This
is necessary to help protect gas supplies, particularly to large
gas consumers without the capability to switch fuels.
This request is exceptional and should not create
a precedent, as fluctuations in gas supply and the resulting impacts
on energy markets are now foreseeable issues for future winters.
We will make it clear to the companies concerned and to industry
more generally that we expect them in future to take full account
of air quality standards and objectives in developing their contingency
arrangements; and, conversely, to take full account of possible
contingency arrangements in discussion of individual environmental
permit conditions with yourselves.
We will continue to work with you, DEFRA and OFGEM
in responding appropriately to the energy situation this winter.
Malcolm Wicks
21 December 2005
