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Released December 16, 2015 | GALWAY, IRELAND
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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)-- The U.K. government has agreed to purchase 46.4 -gigawatts (GW) of power for the period of 2019-20 for a sum of £18 ($27) per kilowatt (kW), more than 7% cheaper than its first capacity auction at the end of last year.
The completion of the second capacity auction was overseen by grid operator National Grid in a process that sees power companies compete to sell future electricity capacity. Last year, the U.K. government paid more than $29/kW to secure future electricity for the 2018/19 period.
Nearly half of the capacity (47%)--almost 22 GW--was awarded to gas-fired power plants, followed by nuclear power (16%), coal and biomass (10%) and combined heat and power (CHP) (9%). The rest is divided between storage, open- cycle gas turbines (OCGT), DSR and hydro projects. For the first time operators of electricity interconnectors running between the U.K., Netherlands and France won contracts. Critics of the auction claimed the low price secured will stop any future investment in new gas-fired capacity, something the U.K. will need soon as its shuts old coal-fired and nuclear power plants.
The U.K. government is moving away from coal-fired power as it focuses on a new nuclear build programme and increased renewable energy, notably onshore and offshore wind. Last month, the government committed to closing all coal-fired power plants within a decade. U.K. Energy and Climate Change Secretary Amber Rudd said that all unabated coal-fired plants must shut down by 2025 and will be restricted in their usage from 2023. For additional information, see November 23, 2015, article - U.K. Calls Time on Coal-Fired Power.
After the auction, U.K. Energy Minister, Andrea Leadsom, said: "Our number one priority is to ensure that hardworking families and businesses have access to secure, affordable energy supplies they can rely on. This result represents a good deal for customers--fierce competition in the Capacity Market has driven down costs, meaning future capacity has been secured the lowest price possible."
She added: "The Capacity Market is a key part of our electricity market reform. The competition helps drive down costs, while ensuring we have enough generation [to] power the nation. It also gets the best out of our existing power stations as we increase the amount of electricity we get from low carbon technologies."
Companies that won contracts included Centrica plc (LSE:CNA) (OTC:CPYYY) (Windsor, England), SSE plc (LSE:SSE) (Perth, Scotland) and Electricite de France S.A. (EPA:EDF) (Paris), among others.
SSE secured agreements to provide a total of 3.15 GW of power capacity for the 2019/20 period, but just under 3 GW of its plant failed to secure contracts, including Peterhead, which also lost out recently when the government cancelled funding for carbon capture and storage (CCS) projects. For additional information, see December 2, 2015, article - U.K. Cancels Funding for Carbon Capture Projects.
Martin Pibworth, SSE's managing director, wholesale, said: "The Capacity Market, now in its second year, is designed to keeps the lights on at the lowest cost to the customer whilst ensuring generators are fairly remunerated for the service they provide to help meet the peaks in customers' requirement for electricity. Whilst some of our plant was unsuccessful in securing an agreement this time round it doesn't affect existing operation at our sites. The Capacity Market is just one of multiple options available to existing plant[s]."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
The completion of the second capacity auction was overseen by grid operator National Grid in a process that sees power companies compete to sell future electricity capacity. Last year, the U.K. government paid more than $29/kW to secure future electricity for the 2018/19 period.
Nearly half of the capacity (47%)--almost 22 GW--was awarded to gas-fired power plants, followed by nuclear power (16%), coal and biomass (10%) and combined heat and power (CHP) (9%). The rest is divided between storage, open- cycle gas turbines (OCGT), DSR and hydro projects. For the first time operators of electricity interconnectors running between the U.K., Netherlands and France won contracts. Critics of the auction claimed the low price secured will stop any future investment in new gas-fired capacity, something the U.K. will need soon as its shuts old coal-fired and nuclear power plants.
The U.K. government is moving away from coal-fired power as it focuses on a new nuclear build programme and increased renewable energy, notably onshore and offshore wind. Last month, the government committed to closing all coal-fired power plants within a decade. U.K. Energy and Climate Change Secretary Amber Rudd said that all unabated coal-fired plants must shut down by 2025 and will be restricted in their usage from 2023. For additional information, see November 23, 2015, article - U.K. Calls Time on Coal-Fired Power.
After the auction, U.K. Energy Minister, Andrea Leadsom, said: "Our number one priority is to ensure that hardworking families and businesses have access to secure, affordable energy supplies they can rely on. This result represents a good deal for customers--fierce competition in the Capacity Market has driven down costs, meaning future capacity has been secured the lowest price possible."
She added: "The Capacity Market is a key part of our electricity market reform. The competition helps drive down costs, while ensuring we have enough generation [to] power the nation. It also gets the best out of our existing power stations as we increase the amount of electricity we get from low carbon technologies."
Companies that won contracts included Centrica plc (LSE:CNA) (OTC:CPYYY) (Windsor, England), SSE plc (LSE:SSE) (Perth, Scotland) and Electricite de France S.A. (EPA:EDF) (Paris), among others.
SSE secured agreements to provide a total of 3.15 GW of power capacity for the 2019/20 period, but just under 3 GW of its plant failed to secure contracts, including Peterhead, which also lost out recently when the government cancelled funding for carbon capture and storage (CCS) projects. For additional information, see December 2, 2015, article - U.K. Cancels Funding for Carbon Capture Projects.
Martin Pibworth, SSE's managing director, wholesale, said: "The Capacity Market, now in its second year, is designed to keeps the lights on at the lowest cost to the customer whilst ensuring generators are fairly remunerated for the service they provide to help meet the peaks in customers' requirement for electricity. Whilst some of our plant was unsuccessful in securing an agreement this time round it doesn't affect existing operation at our sites. The Capacity Market is just one of multiple options available to existing plant[s]."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
