Blackout Britain: Ofgem warns danger of power shortages has significantly increased

Ofgem said the findings "illustrates the need for the timely implementation of the Department of Energy and Climate Change's capacity market"

The regulator said the margin of supply capacity over demand could narrow to between 2 per cent and 5 per cent by 2015 and 2016. (GETTY IMAGES)

The energy regulator Ofgem has warned that the risk of Britain suffering a major power blackout will rise significantly towards the middle of the decade as ageing generators retire from service.

The regulator said the margin of supply capacity over demand could narrow to between 2 per cent and 5 per cent by 2015 and 2016.

Previous estimates suggested that electricity supply capacity would fall to 4% at its lowest.

If capacity were to reduce to 2% it would increase the risk of blackouts towards the middle of the decade.

Ofgem said the findings "illustrates the need for the timely implementation of the Department of Energy and Climate Change's capacity market".

"The risk to electricity supplies is projected to increase from the current near zero levels, although Ofgem does not consider disruption to supplies is imminent or likely, providing the industry manages the problem effectively."

Ofgem also highlighted uncertainty around supply and demand for electricity.

The regulator warned that more investment in power generation and other action is needed to protect consumers from the threat of blackouts.

Ofgem said it has been working with Decc and National Grid to explore options that would provide consumers with additional safeguards against the increased risk to mid-decade security of supply.

All three organisations agreed that it was "prudent" to consider the case for extra measures to help National Grid balance the electricity network during the middle of the decade when capacity margins could be tight.

Ofgem chief executive Andrew Wright said: "Ofgem's latest report on electricity security of supply highlights the need for reform to encourage investment in generation.

"This is why Ofgem welcomes Decc's commitment to introduce a capacity market that will provide a longer term solution to this problem at a time when Britain's energy industry is facing an unprecedented challenge to secure supplies.

"Ofgem's analysis indicates a faster than anticipated tightening of electricity margins toward the middle of this decade. Ofgem, together with Decc and National Grid, think it is prudent to consider giving National Grid additional tools now to procure electricity supplies to protect consumers as the margin between available supply and demand tightens in the mid-decade."

Ofgem's Project Discovery report in 2009 first identified the issue of tightening capacity margins in the middle of the decade, finding that Britain's energy industry faces an unprecedented challenge to secure supplies to consumers due to the global financial crisis, tough environmental targets, increasing gas import dependency and the closure of ageing power stations.