Severn Power Ltd and Sutton Bridge Power Generation have suspended work to return the two UK gas-fired power stations to the market this year after attempts to gain support from the government failed, company directors told S&P Global Platts Oct. 27.
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The two plants, amounting to 1.7 GW in dispatchable capacity, were withdrawn from the market just over a year ago after the then-owner, Calon Energy, entered administration.
The process led to the loss of capacity market agreements for this winter. Although the plants exited administration earlier this year, they did so without capacity market support, seen as vital for a restart.
"The failure to engage in constructive discussions by BEIS and NG [National Grid Electricity System Operator] regarding a solution that would underpin a minimum level of stable returns for the plants has led to the Directors having little option to stop all work associated with evaluation of a potential expedited restart and re-entry to the market of these units," directors Scott Magie and Jeff Holder said in a statement.
In response, a government spokesman said: "We have sufficient capacity to meet demand this winter. It is neither necessary nor appropriate for Government to enter into bespoke contractual arrangements for the return of Severn and Sutton Bridge, or any other generators, to provide electricity capacity this winter."
National Grid ESO said it would not comment on the matter.
While meetings with BEIS on Oct. 20 and National Grid ESO on Oct. 21 indicated both recognized the value of a return to service for the plants this winter, Magie and Holder were "ultimately disappointed" with an unwillingness to engage "in constructive negotiations around an agreement or mechanism value that would allow this."
The four CCGT units at Sutton Bridge and Severn Power were "significantly less polluting" than the coal plant and small gas engine units currently in use, the directors said. Further, they offered savings for "that potentially could be worth billions of pounds," they said.
On Oct. 19, the directors told Platts a minimum level of stable returns for the plants was crucial for a winter 2021/22 return.
"It's a different world now. Carbon and gas prices are through the roof and the risk profile has changed dramatically," Magie said, noting much higher credit requirements and imbalance exposure for generators.
"It would be commercial madness to lock in various prices now because if we are one week late back in the market that will cost a massive amount of money," Holder said.
Winter outlook update
In its Oct. 7 winter outlook, National Grid ESO said the margin between supply and peak winter electricity demand would be around 3.9 GW, down from 4.8 GW for the previous winter.
This margin of 6.6% additional generation was well within the government's reliability standard, BEIS said.
An Oct. 20 update to its Winter Outlook analysis from National Grid ESO showed a deterioration in generator availability since the outlook's data cut-off on Sept. 8.
This was particularly the case for November, with over 500 MW of nuclear capacity unavailable versus the Sept. 8 assessment, with a similar deficit showing for both January and February, 2022.
The ESO continues to forecast sufficient capacity this winter to ensure safe and secure supply, but the question is at what cost?
UK baseload day-ahead electricity is averaging GBP194.23/MWh in October and GBP104.98/MWh year to date, according to Platts assessments.
While high gas prices are behind most of the current power price inflation, tight generation margins are a contributory factor with nuclear and French interconnection availability down.