* Half of Didcot B plant capacity shut due to fire on Sunday
* RWE says too early to estimate when back online
* 7 pct total electricity capacity off in unplanned outages (Adds comment from RWE, analyst, detail on UK capacity squeeze)
By Nina Chestney
LONDON, Oct 20 (Reuters) - A fire at a British power station close to London has closed a power generation unit, which could exacerbate Britain's already constrained electricity supply as winter approaches and demand rises.
While the fire that started on Sunday at Didcot B gas-fired power plant around 70 miles (113 km) west of London has been brought under control, one of two power generation units has been taken offline, operator RWE npower said.
No-one was injured in the blaze.
RWE said the cause of the fire was not yet known and it was too early to tell how long the unit will be out of operation.
"The affected part of the site will remain non-operational until an investigation and repairs can take place," it said in a statement.
The power station - which feeds a densely populated area with few other power stations - produces 1,360 megawatts (MW) of electricity, enough power for 1 million households. The unit that has been shut down produces around half of that.
Britain is already at risk of an electricity supply squeeze as the country's capacity margin - the spare capacity available for planned and emergency use - could fall below 5 percent this winter, which could push up wholesale electricity prices.
"The loss of (Didcot B) would not normally be a cause for concern but UK energy policy has managed to engineer historically low reserve margins as we head into winter," Liberum Capital utilities analyst Peter Atherton said.
"The loss of at least one unit from Didcot B may be particularly problematic as it is located in the high demand Thames Valley region where there are very few major power stations," he said.
He added that Britain would probably escape a serious supply crunch as long as there were no more unforeseen events affecting large power stations.
RWE said the fire broke out on Sunday night in one of the plant's cooling towers.
"The fire was brought under control during the night (...) The fire brigade will remain on site during Monday morning for a handover of the cooling towers back to the local RWE team," the company said.
One unit of around 700-MW capacity at the site, Didcot B5, has been taken offline. The other unit, Didcot B6, is still in service.
"I've been reassured by National Grid that there is no risk to electricity supplies," Britain's Secretary of State for Energy and Climate Change, Ed Davey, said in a statement.
"My priority is to understand the cause of the fire and get the affected unit back generating electricity as soon as it's safe to do so," he added.
This is the third fire at a fossil fuel-fired power station this year. After a fire in February, E.ON has decided not to bring back online one 370-MW unit at its Ironbridge power station in central England.
In July, two units at SSE's one-gigawatt (GW) Ferrybridge coal plant in West Yorkshire were shut after a fire broke out.
EDF Energy also took two of its nuclear plants offline in August for inspections after a fault was found on one of the reactors.
Together with Didcot B, these unplanned outages alone have removed around 4.3 GW of capacity from the UK network, which is around 7 percent of total electricity generation capacity.
There is also more capacity temporarily offline due to planned maintenance or statutory outages.
Grid operator National Grid has announced precautionary measures to keep the lights on, including a scheme to encourage utilities to make idle capacity available and paying offices and factories for reducing electricity use to ensure supply to households. (Reporting by Kate Holton, Nina Chestney and Karolin Schaps; editing by Susan Thomas)