A new report from Ofgem has warned that the high level of spare capacity in the UK electricity market is “set to end quite rapidly over the next few years.” The report shows that spare electricity margins might fall from the current 14 percent average today to just 4 percent by 2015/16.

The analysis suggests that the risk of shortfall is so great that some customers might experience blackouts, with the report stating: “The risk of electricity disconnections will appreciably increase from near zero levels.”

Ofgem has revised predictions made in its 2009 Project Discovery analysis to warn that older coal and oil power stations will come off grid “well before the 2015 deadline.” The watchdog has pointed to the global financial crisis, environmental targets and ageing energy infrastructure as trigger points for increasing risk to energy supplies.  

Ofgem’s Chief Executive, Alistair Buchanan said: “The unprecedented challenges facing Britain’s energy industry, identified in Ofgem’s Project Discovery, to attract the investment to deliver secure, sustainable and affordable energy supplies for consumers, still remain. Ofgem is working with Government on its plans to reform the electricity market to tackle these issues.

“Ofgem is playing its part by helping Britain to attract nearly £30 billion of network investment thorough its RIIO price controls. Ofgem is also seeking sweeping reforms to the retail market to ensure a simpler, clearer and fairer energy market for consumers. This is vital as if consumers are going to be expected to pay for this investment, it is only right that they see a complete change in the way suppliers treat them. Encouragingly, we are increasingly seeing evidence that suppliers have got the message and we will be publishing our next reforms proposals shortly.”

Commenting on the new report, Edward Davey, Secretary of State for Energy and Climate Change, said: “I am grateful to Ofgem for providing to Government their first annual Electricity Capacity Assessment. It provides a comprehensive analysis of the security outlook and Government will consider carefully the implications. We will respond formally before the end of the year.

“Security of electricity supply is of critical importance to the health of the economy and the smooth functioning of our daily lives. That is why the Government is reforming the electricity market to deliver secure, clean and affordable electricity.”