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Back-up scheme to keep lights on
The Government claims to have "defused the ticking time bomb" of an energy crunch with plans to buy vast amounts of power back-up.
The scheme will procure 53.3 gigawatts of electricity generating capacity, ensuring that energy generation equivalent to 17 new nuclear power stations, or more than 80% of UK peak demand, will be available if needed to keep the lights on.
The scheme, known as the capacity market, aims to ensure UK energy supplies are secure towards the end of the decade.
Energy providers, such as new gas plants and existing power stations that might otherwise be shut down, will be able to bid in an auction for payments that will require them to provide electricity capacity when the system needs it.
The cost of the scheme, which will be passed on to consumers in their bills, will not exceed £4 billion, although officials indicated the cost was expected to be closer to £2 billion.
It will lead to an estimated increase of £2 on the average annual household electricity bill between now and 2030.
Energy Secretary Ed Davey said: "There was a real risk back in 2010 that an energy crunch would hit Britain in the middle of this decade and lead to damaging power cuts.
"But the excellent news is that with today's announcement we have the final piece of the jigsaw of our detailed energy security plans and can now say with confidence that we have defused the ticking time bomb of electricity supply risks we inherited."
He said the UK was a world leader in energy security, adding: "Today's announcement - coupled with our record amounts of investment in renewables and electricity infrastructure, our revival plans for the North Sea and the most healthy pipeline of investment projects in new generating capacity and interconnectors ever - means we will remain a world leader."
National Grid confirmed earlier this month that it would put in place measures to tackle the energy crunch the UK faces over the next two winters when the capacity margin - how much the UK's total generating capacity outstrips the expected peak demand - is expected to shrink to as little as 2%.
Payments will be made to large energy users which can reduce their power use - for example by switching to back-up generation - during peak evening hours in winter on weekdays between 4pm and 8pm.
The moves by the Government come as regulator Ofgem published its annual assessment of the security of the UK's electricity supplies.
It confirmed previous warnings that the capacity margin could fall as low as 2% in winter 2015/2016, as although there has been a sharp drop in power demand since last year, more power plants had come offline than expected.
Although margins remain tight, Ofgem said that consumers faced a much lower risk of power cuts as a result of the powers National Grid had been given to reduce demand during peak times.
Without such measures, consumers could face as much as a one-in-four chance of power cuts in winter 2015/2016, but with the steps to ensure security of supply, the risk of power cuts would be one in 31 under the worst case scenario.
Ofgem added that before consumers were cut off, other measures could be taken, including lowering the voltage of supplies - which would dim lights - and ordering power suppliers to produce electricity at maximum capacity.
If there were shortages, industrial customers would be affected before households, the regulator said.
Dermot Nolan, Ofgem chief executive, said: "Britain has a reliable electricity system and although the outlook for capacity margins is broadly similar compared with last year's report, the fact National Grid can use the new tools to balance the grid has reduced the risk of disconnections.
"This is good news for consumers and businesses and we are confident that National Grid has the right levers in place to manage the tighter electricity margins over the coming winters.
"However, no system anywhere in the world can give a 100% guarantee that the lights will stay on. Therefore given the tighter margins there can never be any room for complacency and National Grid and the industry must remain vigilant at all times."