CBI chief warns of looming energy crisis

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The Independent Online

Industry faces the threat of another energy crisis this winter, the director general of the CBI warned yesterday.

Richard Lambert, who took over the reins at the employers' group this month, said he would be "rattling cages" in London and Brussels to prevent a repeat of power shortages that hit businesses last winter. His warning came a day after electricity prices trebled as National Grid warned that the margin of spare power generation capacity was under threat. Speaking during an official visit to Liverpool and Manchester, he said: "There is a real anxiety about this coming winter, over the supply and price of gas for energy-intensive industry.

"Last winter was tight and this winter there's going to be a lot of fingers crossed. In the first half [of the winter] there could be a problem."

He said that neither the Rough storage facility nor the inter-connector pipeline with Norway would come onstream until the second half of the winter. "It could be a game of two halves."

Electricity prices fell slightly yesterday from the levels seen on Tuesday after the National Grid withdrew its "insufficient margin warning". But they still remained unseasonally high, peaking at £367 a megawatt hour compared with £387 the previous day.

Glen Rickson, editor of European Daily Electricity Markets, said that a lot of expensive oil-fired generating plant appeared to have come on stream in response to the Grid's call for more capacity.

He said that four factors were driving prices higher: heavy use of air conditioning due to the extremely hot weather, which hit 35 degrees yesterday; annual refurbishment programmes which had taken a number of stations out of service; unplanned "outages" at a number of sites; and a shortage of electricity imports from France, which has run short of water to cool its nuclear reactors.

Last winter several major industrial sites were forced to stop production after spot gas prices rose fivefold, making it impossible for them to maintain production without racking up losses. UK gas suppliers blamed lack of competition and transparency in Continental energy markets.

Industry leaders echoed Mr Lambert. Paul McKeon, the operations director for buildings products at the Merseyside glass giant Pilkington, said: "We are very, very nervous, to be honest. There are several indicators about the tightness of supply. We are nervous across Europe because in terms of shortages it is industry that's the first to be hit."

Paul Jennings, the chief executive of Innospec, a chemicals company in Ellesmere Port in Cheshire, said: "Significant increases in energy cost [are something] we cannot pass on to our customers."

If the hot weather, and worries about electricity supply, continue, National Grid will ask big users of power to restrict their use. One option could be asking power suppliers to turn down the voltage for households and businesses.