Great Britain faces some of Europe's highest energy costs this winter

Great Britain is expected to pay some of the highest energy costs in Europe this winter, as its reliance on imports to keep supplies steady is forecast to deepen. The country's energy system operators say there will be enough gas and electricity to meet demand over the coldest months – in part because buyers are paying more than neighbouring markets to secure imports.

The official winter forecasts were published days after Europe's gas market benchmark rose to its highest level since December 2022, when Russia's full-scale invasion of Ukraine sent prices soaring.

Pipeline deal adds to bills

National Gas, which runs Great Britain's gas networks, issued its outlook after striking a late deal with the owner of a major Belgian pipeline. The agreement reverses a planned cut in capacity and keeps gas flowing into the country through the winter. The regulator, Ofgem, approved the deal, which will add about 10p a month to the average gas bill. Without it, there was a danger of gas running out in a worst-case scenario where an important part of the gas networks failed as temperatures plummeted.

More LNG imports expected

Alongside pipeline deliveries, Great Britain is expected to increase imports of seaborne liquefied natural gas by about 5% compared with last winter, according to National Gas. That comes as market prices are three times higher than they were before the Middle East crisis severely disrupted Gulf supplies. The outlook report suggested prices could stay elevated if UK buyers have to compete more fiercely with European countries for LNG cargoes, with gas storage levels low across the continent.

Europe ended August heading into the cooler months with gas stores at their lowest level in 13 years, after a slowdown in exports from Qatar, one of its biggest suppliers, and higher summer consumption for cooling during record heatwaves linked to the climate crisis.

The UK has some of the smallest gas stores in Europe, having relied for decades on homegrown North Sea production, which is forecast to fall 6% this year. The government's contentious approval of the Jackdaw gasfield this week – not fully reflected in the winter forecasts – is expected to give supplies a modest lift when it starts up next month.

Electricity imports

The National Energy System Operator expects Great Britain to be a net importer of electricity over the colder months, likely at higher cost because European power supplies are tighter than last winter. Summer heatwaves cut river levels across Europe, reducing French nuclear output and leaving Norway's hydroelectric reserves below their 10-year minimum since late July.

The UK paid a record £4bn for power imports in the year ending in August, half of it on electricity from France, according to Office for National Statistics figures. It also made near-record payments to fire up gas plants while wind and solar farms were paid to turn off because of grid bottlenecks.

Gas plants will be used less overall this winter as renewable energy levels rise, but the need for gas during power supply crunches could be 7% higher than previously assumed. National Gas lifted its gas power demand forecasts for the most extreme scenarios after noting that gas plants have stayed in heavy use when dark, still winter days bring high electricity demand and lower renewable output.

Glenn Bryn-Jacobsen, a director at National Gas, said: "While supply diversity and flexibility remain sources of resilience, taken together these trends in demand and supply have resulted in tighter supply margins during periods of high demand and system stress."

Source: The Guardian Business.