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UK energy crisis deepens as SSE plans early plant closure

February 3, 2016

By Paul Homewood 

   

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http://www.telegraph.co.uk/finance/newsbysector/energy/12139151/UK-energy-crisis-deepens-as-SSE-plans-early-plant-closure.html

 

The Telegraph reports:

 

SSE has announced plans to shut most of its Fiddler’s Ferry coal-fired power plant in April, wiping 1.5 gigawatts of power capacity from the UK grid and worsening the looming energy crisis next winter.

The energy giant said it intended to shut three out of four units at the loss-making Cheshire power station, reneging on a Government subsidy contract to keep them running until 2018-19 and putting 213 jobs at risk.

The move, which the Telegraph revealed SSE was considering last week, was condemned as "extremely disappointing" by the Government, which sought to reassure households the lights would stay on.

"We will continue to work alongside National Grid and Ofgem to take whatever additional steps are necessary to protect our energy supply," a spokesman for the Department of Energy and Climate Change said.

 

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

 

UK energy supplies were already forecast to fall to dangerously low levels next winter due to the closure of several other old plants.

Emergency measures have been brought in to bolster supplies after official analysis suggested there could be zero spare capacity in the market, and insufficient power to keep the lights on on a windless day.

John Musk, analyst at RBC Capital Markets, warned UK margins would now be “critically tight for next winter” and forecast this would lead to "extremely volatile" spot power prices.

SSE will face a £33m penalty for pulling out of its Government contract but said the alternative was to incur "unsustainable losses" which would "undermine SSE’s ability to invest in modern generation plant in the UK".

Fiddler’s Ferry had already racked up "substantial" losses in recent years and this was expected to continue through to 2020, even with the subsidy contract, it said. Analysts estimate annual losses of £30m-£50m.

SSE said coal plants were running less often than they used to as they were pushed out by "cheaper alternatives, namely low carbon and gas-fired generation".

This trend was only forecast to continue, it said, citing energy secretary Amber Rudd’s announcement last year that all coal plants would close by 2025.

Fiddler’s Ferry, which was opened in 1971, would also require "significant levels of expenditure to maintain safe operations and adequate levels of reliability", it said.

In 2014 SSE secured a subsidy contract, estimated to be worth £27m, through the Government’s capacity market, which was supposed to guarantee the three units would be available to help keep the lights on in 2018-19.

SSE said that the economic outlook in the generation market had "changed substantially" since then and the plant was "projected to incur unsustainable losses even with this contract".

In December it attempted but failed to secure a similar contract for the plant for 2019-20.

The fourth unit of the plant is expected to remain running this winter, having secured an emergency contract from National Grid.

SSE said it could not rule out compulsory redundancies among the staff at the station.

Paul Smith, SSE managing director for generation, said: "The reality is that the plant at the station is aging, its method of generating electricity is being rendered out of date and it has been, and is expected, to continue to be loss-making.

"The fact it makes more sense for SSE to contemplate making a substantial payment in lieu of the capacity agreement relating to Fiddler’s Ferry in 2018/19 demonstrates just how economically challenged Fiddler’s Ferry has become." 

 

The writing has been on the wall for sometime, as I reported last week.

But let’s be clear about one thing. This comment “SSE said coal plants were running less often than they used to as they were pushed out by "cheaper alternatives, namely low carbon and gas-fired generation" is total bunkum. “Low carbon alternatives” are not cheaper, but they can undercut coal because of the obscene subsidies they receive. Gas certainly is coming down in cost, but still faces exactly the same problems that coal does. The only reason SSE are lying is because they are reliant on those very subsidies.

It says a lot about the ability of our journalists these days, such as dear little Emily, that they have not yet worked this out yet.

 

As for DECC’s pathetic statement that “We will continue to work alongside National Grid and Ofgem to take whatever additional steps are necessary to protect our energy supply”, there is one very simple step they can take to ensure that – scrap the Climate Change Act, abolish carbon taxes and put a stop to all further renewable subsidies.

Simples?

22 Comments leave one →
  1. Joe Public permalink
    February 3, 2016 9:17 pm

    Doncha just love the top image showing water vapour rising from the cooling towers, yet NO visible emissions from the chimney!

    Emily Godsen’s Picture Editor should be ashamed of using such a misleading image.

    • February 3, 2016 9:19 pm

      Do you think that reporters have the least idea about what cooling towers do? I do not!

    • February 4, 2016 7:20 am

      I used to live on the edge of the Peak District. On a good day, beyond Jodrell Bank you could see Fiddlers’ Ferry in the far distance, about 30 miles away. You could see the clouds of condensing water vapour, but you couldn’t see any smoke from the stack, not even when using binoculars.

  2. February 3, 2016 9:18 pm

    I wonder how much wealth would be created if we were to remove the stupid taxes and subsidies and price power according to fuel costs with non-reliability penalised. The coal fired station, esp. Drax would be almost base loaded.

    However, our political class does not have the first clue and are totally wed to the “proven science”.

  3. February 3, 2016 10:00 pm

    Oh! yes Jack, they know exactly what they are doing.Using Marxist economics by skewing the Energy Market with Green driven subsidies,Comrade Cameron,s pledge to de-industrialise the UK will come into fruition,and the poor ,the old and the cold will die in their thousands once again.

    • A C Osborn permalink
      February 3, 2016 10:18 pm

      Vulcan, love your ID.

  4. Graeme No.3 permalink
    February 3, 2016 10:53 pm

    The race is on; who will be the first to have long blackouts?
    The runners are:
    Germany – can carry lots of weight but wobbles all over the place.
    UK – foolish jockey placing the horse on debilitating diet.
    Scotland – blind jockey on rickety nag.
    South Australia – deaf and blind jockey keen to tackle hurdles while rest race on the flat.

  5. February 3, 2016 11:01 pm

    Graeme says: ‘The race is on; who will be the first to have long blackouts?’

    A place in Wikipedia’s hall of shame awaits the lucky winner(s).
    http://en.wikipedia.org/wiki/List_of_major_power_outages

  6. February 3, 2016 11:11 pm

    “The only reason SSE are lying is because they are reliant on those very subsidies.”

    So the power they are not supplying from the coal-plant is being supplied by other SSE gas and wind power plants? If it is just competitors fulfilling the demand, then it’s not a lie, just a depressing response to a distorted economic system.

    What happens to these “closed” coal power stations, anyway? Do they dismantle them or just mothball them for later when the Government is so desperate that they will pay anything for more power?

    In Alberta, Canada, the new eco-green government (NDP) was said our coal-plants will similarly be shut-down. I haven’t seen a word, though, of dismantling them. My suspicion is that they will be moth-balled until a crisis, then will use taxpayers’ money to retrofit and be announced as sufficiently “green”, and then go back to doing what they do well – supplying cheap electricity.

    • February 3, 2016 11:33 pm

      The usual answer is one of two things, at least in the US. 1. The boilers and turbines are scrapped, but the generators are repurposed (with some modifications) as synchronous condensers to supply reactive power compensation (to laymen, voltage and phase stabilization). 2. The whole thing is scrapped and the land repurposed. In south Florida, we just scrapped out two old fuel oil fired stations (Palm Beach and Fort Lauderdale), and the land was repurposed to brand new, larger CCGT. The site transmission substations were upgraded, not scrapped. Of course this was without all the crazy UK market distortions.

  7. Paul2 permalink
    February 3, 2016 11:15 pm

    Dunno what all the fuss is about. This’ll keep the lights on:

    http://www.bloomberg.com/news/articles/2016-02-03/biggest-offshore-wind-project-yet-gets-green-light-from-dong

    • February 4, 2016 12:13 am

      I’ve got a gen-set & 1,000 liters of diesel to keep my lights on

      (my own STOR system)… Short Term Operating Reserve

    • Graeme No.3 permalink
      February 4, 2016 11:34 am

      Paul2:
      At the guaranteed rate for that off-shore wind they are getting 10 times the wholesale rate of electricity from brown coal fired stations in Victoria. Hell! they are getting more than the nuclear power station the Government is praying will be built before the lights go out (it won’t) and 3 times the current price for electricity in the UK.
      It is about time some “public servants” were fired (and their gullible puppets too).

  8. markl permalink
    February 4, 2016 12:40 am

    Consequences are coming home to roost. I feel for the people of UK who will suffer lack of power and pay exorbitantly for what they do receive due to the AGW insanity.

  9. John F. Hultquist permalink
    February 4, 2016 5:47 am

    About SSE:
    In January 2010, Scottish and Southern Energy changed to SSE plc. ( Public limited company). It is a constituent of the Financial Times Stock Exchange (FTSE) 100 Index.
    Companies have shareholders that expect the directors to have fiduciary responsibility for the decisions they make with regard to corporate assets and the rights of stockholders. Simply put, in the long term, the company isn’t supposed to go broke just because the government finds the decisions are “extremely disappointing.”
    Full disclosure: I own shares in a mutual fund that owns shares of SSE.

  10. Ex-expat Colin permalink
    February 4, 2016 7:48 am

    I thought the D. Teleg had gone to US ownership? Just read some of the Obits now.

  11. February 4, 2016 10:04 am

    What Fiddlers Ferry really looks like without the trick camera effects – I know because I took the picture myself.

    • February 4, 2016 10:22 am

      “Hmph. You can use facts to prove anything!” – (Homer……… Simpson

      Next you’ll be saying that Fiddlers Ferry can produce energy more reliably & cheaper than wind & solar and the land around it isn’t black & scorched without a flower or a blade of grass!!

  12. rwoollaston permalink
    February 4, 2016 12:53 pm

    Does anyone know whether the energy subsidy figures are available so we can see, year on year, the cost to the taxpayer?

    • tom0mason permalink
      February 4, 2016 3:05 pm

      I can not find exactly what you want. However you may find this of interest…
      From House of Commons Environmental Audit Committee Energy subsidies Ninth Report of Session 2013–14 Volume I

      Q22 Peter Aldous: Just going forward in a similar vein, would you agree that it is logical to exclude from subsidy calculation the ability that oil companies have to set off exploration expenditure against revenues immediately, when with capital investment in other
      areas of the economy that can’t be done?


      Answer from Dr Blyth:
      That is different. Again, it is a different tax regime. All I can say in answer to that question is that the OECD methodology recognises that that is a different approach, but they do not consider that that is a subsidy. I think that is because that is a relatively normal type of approach used internationally. So, although it is different from the typical way that corporations are taxed in the UK, it is not unusual internationally to operate in that way.

      Q23 Peter Aldous: It is a change in the—

      Answer from Dr Blyth:
      In the case of most of them, it does not change very much, but in the case of renewables it
      changes a lot because renewables has been growing so quickly.
      If you divide one by the other, the real figure should be something like £50 per MWh for renewables, which is roughly around the value of the ROCs, the renewables obligation certificates. If you divide one by the other in the nuclear column, you get something around £33. So, in answer to the question, the most subsidised on a per-unit basis is renewables.

      A list of other reports on this subject are here

  13. Peter MacFarlane permalink
    February 5, 2016 12:39 pm

    “scrap the Climate Change Act, abolish carbon taxes and put a stop to all further renewable subsidies.”

    Great ideas all, but of course the EU wouldn’t let us adopt any of them.

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