30 Oct 2023

The winter electricity outlook: Will the data centre sector weather another energy crisis

Prior to last winter the media made dire forecasts of the potential for electricity blackouts in Great Britain, which of course didn’t materialise. They did sell a lot of newspapers though…

As reported in my previous blog, it’s true that last winter we were in a more precarious position than we are today; still emerging from the fallout of the cessation of gas flows to Europe from Russia, sabotage of natural gas pipelines, very high energy prices and uncertainty about global supply and stocks of natural gas.

Nonetheless, detailed market insights were available, if you knew where to look, that told us the market across Great Britain was sufficiently robust to see out the winter, even in the event of a prolonged cold snap. As we reported in July, there was absolutely no interruption to customer demand due to unavailable supply last winter.

Recently the National Grid Electricity System Operator (NGESO) has published its Winter Outlook for 2023-2024 report which details how they will ensure the electricity transmission network is balanced through this coming winter and how they’ll keep the lights on. The headline is ‘the electricity system margin’, the amount by which available sources of electricity supply exceed demand at peak times, has improved since last winter, 7.4% this winter versus 6.3% last winter.

Following the NGESO Winter Outlook, Kao Data has published a new whitepaper to help data centre operators and their end-users understand the current UK energy market situation and to give a high-level outlook for the winter ahead. We want to reassure businesses of the stability of the national electricity infrastructure and the contingency measures in place to keep British businesses connected and powered.

Generally, the outlook for this winter is good, and in fact even better than last winter. Electricity prices have come down considerably since this time last year, over £350/MWh then, versus £110/MWh today, as we have adapted to the reduced gas supply from Russia and are now importing Liquified Natural Gas (LNG) from further afield.

Gas prices have softened to such an extent that across the summer we have been able to inject gas into storage bringing UK gas storage levels (at the time of publishing this blog) up to c.99% full and the EU up to 98% full. There are also currently several liquified natural gas (LNG) tankers at sea, off European coastlines waiting to unload when the price is right.

Early weather data forecasts a milder and wetter winter than average, which will suppress peak demand and reduce the requirement to withdraw gas from our storage facilities. The longer gas storage remains available to us the longer prices will remain softer.

NGESO expects winter margins to be adequate with a sufficient operational surplus throughout winter but there will be some days when the standard tools in their operational toolkit may need to be used, and in particular the Demand Flexibility Service (DFS), when energy end-users will be paid to reduce consumption.

Kao Data clients can rest easy in the knowledge they will be well-served by their data centre operator in the highly unlikely event of electricity supply issues, primarily owing to the fact that Kao Data has its own backup generators that can run for 48 hours on 100% sustainable hydrotreated vegetable oil (HVO).

Before that even becomes a consideration, however, Kao Data clients can have confidence that national electricity system will be balanced and maintained through winter 2023/24 by the country’s National Grid ESO - the same as it was last winter, and countless winters before.

To download a copy of our new whitepaper, ‘The winter outlook for the GB electricity market 2023/24 and its implication for the data centre sector’, click here.


About the author

Wayne Mitchell has over 25 years of energy sector experience, most recently as an independent consultant, advising major energy users, and prior to that spending 20 years in industrial and commercial energy retail with E.ON and npower.

He has worked with some of the most high profile energy consumers helping them navigate the most volatile energy market conditions. In his most recent corporate role as the Director of Corporate & Strategic at E.ON, Wayne was also a member of the senior leadership team of the £5bn revenue industrial and commercial division of where he was responsible for all major energy clients across electricity, gas, export, and metering.

Today Wayne has a reputation for creativity, commercial rigour, and generating new revenues, and has led successful teams in pricing, sales, operations, marketing, energy services, and origination. He has written a series of blogs for Kao Data during and following the energy crisis and has now written this whitepaper to help clients understand the outlook for the winter ahead.


Wayne Mitchell

Wayne Mitchell has 25 years experience in the energy business across coal, gas and renewable electricity, spending the last 14 years with E.ON and npower, and is now working independently. Most recently Wayne was the Director of Corporate & Strategic, and one of the senior leadership team of the industrial and commercial division of E.ON UK, and was responsible for all major clients across electricity, gas, export, and metering.



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