Given the war in Ukraine and associated sanctions on Russia and reciprocal withholding of supply, Europe is facing a gas shortage.

The UK imports very little Russian gas, but because of the reduced supply is still facing potential shortages over the winter (when heating consumption increases and renewable electricity generation decreases).

If there are gas shortages, large consumers may be asked (potentially required by law) to stop consuming gas. These large consumers are likely to be gas powered electricity generators.

When an electricity generator fails to provide as much electricity to the grid as it is contracted, it faces fines.

The energy company SSE claims that

an averaged-sized power station could face charges of around £276m a day if it is unable to generate electricity.

source BBC

This is a very large number, and I find it surprising that a single power plant going offline for 24 hours would rack up a quarter billion of fines.

Is this number accurate?

  • 2
    Another version of the BBC article that appears here mentions the same £276m/day figure, also adding "This could rise to £475m for a larger plant." These two figures of £276m and £475m seem to be taken from this slide presentation related to this proposal from the energy producer SSE.
    – Dan Romik
    Oct 3, 2022 at 19:47
  • 3
    ... However, the £276m and £475m in the slide presentation do not come with a clear time unit, so it could be per day, per month, per year etc. This could well turn out to be a reporting error.
    – Dan Romik
    Oct 3, 2022 at 19:48
  • If anyone wants to dig deeper into this, here are some additional links I found: letter from OFGEM (doesn't mention the £276m number), pages explaining imbalance pricing: 1, 2.
    – Dan Romik
    Oct 3, 2022 at 19:50
  • The first mention of SSE is in "Ofgem wrote a letter in response to SSE, which operates four gas-fired power stations in the UK that produce electricity." From its link it seems to be "Scottish and Southern Energy". But it is not until a few paragraphs later that the context is given: "SSE said that an averaged-sized power station could face charges of around £276m a day if it is unable to generate electricity." My guess is the report is a poorly crafted cut & paste job. Oct 3, 2022 at 20:11
  • 2
    There is an older convention in finance that an m suffix on a number means thousand (from Latin mille) instead of million (which in that style is denoted MM). The BBC's style guide says that m should mean million, but it's possible their source meant thousand and someone misunderstood. So conceivably the amount is only £276 000. Oct 4, 2022 at 0:22

1 Answer 1


UK power generation contracting is based on imbalance trading:

A Party is out of balance when its contracted energy volume does not match its physical production or consumption.

SSP[System Sell Price] is paid to BSC Trading Parties who have a net surplus of imbalance energy, and SBP[System Buy Price] is paid by BSC Trading Parties who have a net deficit of imbalance energy. These prices are designed to reflect the prices associated with the Balancing Mechanism Bids and Offers selected by National Grid to balance the energy flows in the Transmission System, as well as reserve scarcity.

We can assume that in the instance of a contract breach (i.e. an event that causes a long-term blackout) the party responsible will need to pay out not only the price of caused imbalance, but also damages caused by the blackout. Based on the linked article:

Value of Loss Load (VoLL)

The VoLL price is an assessment of the average value that electricity consumers >attribute to the security of supply. It is currently set at £6,000/MWh.

The largest gas-fired power plant in the UK is the Pembroke B Power Station with nominal capacity of 2000 MW. Assuming it was contracted for its full capacity and was inoperable for 24 hours, it would create a shortage of 2000 MW*24h = 48000 MWh. Taking the maximum number from the comments attributed to a "larger power station" (£475m) means that the station operator would need to pay out ~£10000 per MWh. Taking the £276m value for the "average" case would bring us a fine of ~£23000 per MWh for a 500 MW station, or half that amount for a 1000 MW one; it's not clear what "average station" SSE meant in their statement. According to August 2022 data, maximum System Buy Price for August was £890 per MWh (for perspective - mean value was £437.96); so even assuming the £6000/MWh value is factored into the fine, and assuming the prices have doubled since August - there are still over £2200 (or much more for a smaller station) that are unaccounted for.

Conclusion: the payouts for a 1000 MW power station that was contracted for its full power and then was inoperable for a day would indeed be at least in the tens (and possibly even reach hundreds) of millions of pounds, but most likely not quite as high as the numbers stated in the linked BBC article, unless energy prices grew exponentially over last two months.

  • 2
    I think this applies to the spot market only. So usually one hour ahead at most. Otherwise it would push stations to stay on line when it is unsafe. (Echoes of Chernobyl.) Spot market penalties can be huge, but only apply for the length of time the bid is locked in, usually no more than one hour and often as little as 10 minutes. Long term contracts usually do not go through an auction and have negotiated outage penalties that are much smaller.
    – BillOnne
    Oct 9, 2022 at 4:48

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