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Energy security threat as SSE mulls early closure of coal plant

January 29, 2016

By Paul Homewood 

 

h/t Paul2

 

image

http://www.telegraph.co.uk/finance/newsbysector/energy/12128668/Energy-security-threat-as-SSE-mulls-early-closure-of-coal-plant.html?utm_source=dlvr.it&utm_medium=twitter

 

News from the Telegraph (complete with misleading photography):

 

 

Energy giant SSE is considering shutting its Fiddler’s Ferry coal-fired power plant early, threatening to blow a hole in the Government’s plans to keep the lights on, the Telegraph has learnt.

The 2GW power plant in Cheshire produces enough electricity to power two million homes and in 2014 secured a subsidy contract with the Government to guarantee three of the plant’s four units would be available to generate in 2018-19.

But SSE is now understood to be considering pulling out of the contract and shutting the plant sooner, because the subsidies through the ‘capacity market’ scheme may not be enough to outweigh losses the plant is incurring.

Although no decision has yet been taken, analysts say SSE could even opt to shut part of the plant before next winter, when the UK’s capacity margins are already expected to fall dangerously low.

One of the four units at Fiddler’s Ferry has a contract with National Grid to provide back-up power for next winter, but the other three could be in doubt, Lakis Athanasiou, analyst at Agency Partners, said.

Burning coal at Fiddler’s Ferry is increasingly uneconomic due to low power prices and the UK carbon tax.

 

In December, SSE failed to secure a subsidy contract for Fiddler’s Ferry in the Government’s capacity market auction for winter 2019-20, losing out to other plants including new diesel generators.

In a trading update on Thursday, SSE said it was still analysing "options for the future operation of power generating plant" in light of the auction results and expected "to complete that analysis and reach conclusions shortly".

If Fiddler’s Ferry were to close early it would be the second major blow to the Government’s capacity market after the Telegraph revealed last year that the only new gas-fired power plant due to be built under the scheme, at Trafford, was also in doubt.

Although companies face penalties for failing to deliver promised capacity, SSE could be prepared to take the hit in order to avoid even greater operating losses.

Mr Athanasiou estimated SSE could lose £50m to £60m a year at Fiddler’s Ferry, because power prices were forecast so remain so low that coal plants – which face higher running costs due to the UK’s carbon tax – would only be likely to be running during winter daytimes.

"Doing that, the kind of money they’re going to be earning is just not enough to cover their cash costs," he said.

SSE would have to decide whether it was worth the risk of incurring these losses in order to honour the subsidy contract for 2018-19, which is worth about £27m, and to avoid the penalty for pulling out of the contract, which would be about £35m.

It could also pursue further emergency back-up contracts with National Grid, such as the one for one unit next winter which Mr Athanasiou estimated was worth £18m.

He said he believed SSE would either "wait another year to see what happens or shut down part of the plant".

"It will depend on their view of what the prices are going to do in future," he said. "If they decide the forward curve is what it is, the decision I think is take the penalty and shut down.”

A SSE spokeswoman said: "Following the capacity market auction in December we said we would continue to analyse market conditions and opportunities for all our plant going forward.

"That analysis is continuing and in the meantime existing operations are unaffected."

Ministers announced plans last year to tighten up the penalties for failing to deliver under the scheme, and are also conducting a wider review of the scheme to try to ensure it delivers new gas plants rather than diesel generators.

A spokesman for the Department of Energy and Climate Change said: "We are clear that providing a secure supply of affordable energy for our families and businesses is non-negotiable.

"We have taken steps to protect our energy supply and will continue to do so working alongside National Grid and Ofgem."

 

I am continually puzzled why “experts” are surprised that coal power has become uneconomic because of the carbon tax. After all, that was the whole point of it. My guess is that Fiddlers Ferry will stay open through 2018/19, but if it really is losing so much money, I can’t see it lasting beyond that.

17 Comments leave one →
  1. Bloke down the pub permalink
    January 29, 2016 11:22 am

    If the photo had been taken in normal lighting conditions, most people would’ve assumed that the station was shut already.

  2. martinbrumby permalink
    January 29, 2016 12:11 pm

    By now, I’m sure that, in their heart of hearts, everyone understands that we aren’t going to get a rational energy policy from the likes of Dave Boy & Amber Rudd.

    Any more than we are likely to get Brexit from any forthcoming referendum.

    Unfortunately, this whole charade is going to have to end badly. It won’t be fun. People will die. The majority of the rest will have to be prepared to shiver in the dark.

    But that’s what it will take before our beloved political “elite” take notice of everything that has been obvious for years to more rational people.

    • Derek Buxton permalink
      January 29, 2016 1:41 pm

      This insane government will not take any notice of people dying, Camerloon is so tied up with this stupid “no carbon” economy that he will stop at nothing to ruin the Country and People. He has no understanding of the real world and it seem that his daft wife is pushing her agenda.

  3. January 29, 2016 12:52 pm

    The madness of the “believers” is that we could be importing an extra 10m tpa coal at low world-prices rather than all the gas and power from interconnectors: the Germans can obviously see this why cannot we. The balance of payments is bad enough without suicidal policies.

    The economics of power generation are being deliberately obfuscated in the interest of hidden tax ease and because the foreign companies who now own the system need massive incentives to spend the serious capital that is needed to build power stations: this was a stated duty of the old CEGB (RIP).

  4. Paul R permalink
    January 29, 2016 1:07 pm

    Paul, it gets worse, have you seen this?
    http://www.bbc.co.uk/news/uk-wales-north-west-wales-35432478

    I presume the relative dribble of electricity from this will be at the highly expensive end of the scale and the greater availability of prawn mayo sarnies will be scant consolation. Note the gushing article does not pick up on the irony that the site is the former home of a manufacturing enterprise which closed due to high energy costs

    • Derek Buxton permalink
      January 29, 2016 1:46 pm

      You are right. Every time you think they have plumbed the depths, they come up with even more insane ideas. Biomass plant should boost food prices no doubt.

    • January 29, 2016 5:12 pm

      Love the way the BBC fail to mention that the ‘waste wood chippings’ that fuel the plant will likely be shipped transatlantic from clear cut forests in the USA – same as Drax. How environmentally friendly! I wonder if they’ll have the same problems with EU state subsidy investigations as Drax have been having,

      • Paul R permalink
        January 29, 2016 5:29 pm

        Unfortunately Welsh politicians, who are the very bottom scoop of the talent puddle, are fully on board with the war on “carbon”…

    • Rod permalink
      January 29, 2016 9:10 pm

      I don’t know if you’ve driven the NW Welsh roads or over the suspension bridge to Anglesey, but 1,000s of extra trucks shipping wood waste to the plant will not be popular. And if the loading damaged the bridge, Anglesey’s economy would really be on the blink.

  5. January 29, 2016 1:14 pm

    The Daily Signal posted a piece on what is happening in West Virginia with the coal industry. This is the second year of a Republican led legislature for the first time in 83+ years. Due to the Obama dictated demise of coal, the state is in dire financial straits. Individuals and families have been thrown into poverty. Obama does not care. He is getting even with those who did not vote for him–it is what a narcissist does. .

    http://dailysignal.com/2016/01/27/west-virginia-turns-to-prayer-as-obamas-clean-power-looms/?utm_source=heritagefoundation&utm_medium=email&utm_campaign=morningbell&mkt_tok=3RkMMJWWfF9wsRovvK%2FKZKXonjHpfsX57uQlUKGxlMI%2F0ER3fOvrPUfGjI4ASMVqMa%2BTFAwTG5toziV8R7jHKM1t0sEQWBHm

  6. Paul Richards permalink
    January 29, 2016 2:02 pm

    ________________________________

  7. January 29, 2016 4:05 pm

    Looked up Fiddler’s Bridge. Opened in 1971, so already 45 years old. Even without all the UK nonsense, the average US coal station closes at age 48 for economic reasons. SSE is faced with uneconomic wind forced flexing and apparently EU demands for additional scrubber investment. Perfectly rational for SSE to say subsidize me or I shut the 3 of four units not under capacity guarantee. They are under no obligation to incur loses supporting UK green wind madness.

    • January 29, 2016 4:17 pm

      Dead right.

      The real problem is that building of new coal plants has effectively been banned for years, as they are only allowed to be built with CCS.

  8. RogerJC permalink
    January 29, 2016 6:30 pm

    China and Korea are now building coal fired 1000 Mw Ultra Critical Boiler/Turbine sets with 46% efficiency. Most of the existing sets have at best 40% efficiency. Seimens say every 1% is increase inefficiency saves 23 million tons of CO2. Perhaps the UK needs to look at this technology as it only takes them 4 years to build one of these units.

    • Graeme No.3 permalink
      January 29, 2016 10:36 pm

      RogerJC:

      I think that the bureaucracy can lengthen that build time to somewhere near the never-never time.
      Anyway why would anyone build a power station in a country where they are trying to run it out of business?

      I note that the Directors of Fiddler’s Bridge could claim that it is illegal to run a company when it is bankrupt.

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