The closure of EDF Energy's 1 GW Dungeness B nuclear plant in Kent removes another chunk of capacity from the UK's dwindling nuclear fleet, but the news was not a surprise and the market had priced in its non-return, S&P Global Platts Analytics said June 8.
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On June 7, EDF Energy confirmed the ageing plant, which has been offline since 2018, would not be returning to the market.
"EDF had signaled earlier this year that Dungeness B may never return from its three-year outage, and its recent decision to extend the current outage by a further 10 months was another clear warning sign to the market, which had likely already largely priced in the plant never returning," said Platts Analytics' head of European Power Analysis, Glenn Rickson.
Market sources agreed, with one UK power trader saying the asset had not been expected back for the coming winter, although its absence could have impacts further down the line. EDF Energy had wanted to keep Dungeness B running to 2028.
A GBP2.25/MWh rise in the Winter 21 contract to GBP84.40/MWh ($119.30/MWh) June 8 was put down to rising gas and carbon prices and not the Dungeness B news.
Closure, however, added to the UK's deteriorating dispatchable plant outlook, Rickson said.
Between this news and the early closure of reactors at Hunterston B and Hinkley Point B by the middle of 2022, UK installed nuclear capacity will have fallen by a third from current levels, to 6 GW by end-2022, he said.
"And with the Calon gas fleet also expected to be out of action for the forthcoming winter and the Drax and West Burton coal plants only available in extreme conditions, we are likely to see a repeat of last winter's extreme prices in the event of cold, still weather, particularly if power demand recovers from the lockdown-limited levels seen last winter," he said.
All existing UK reactors are scheduled close by the end of 2031 with the exception of Sizewell B, which is expected to secure a 20-year life extension to 2055.
In terms of replacement capacity, Platts Analytics sees a first 1.6 GW EPR unit at Hinkley Point C coming online in 2027, around a year behind EDF's own schedule, with a second unit online in 2028.
It assumes Sizewell C (another 3.2 GW EPR project) will go ahead, but with construction only starting in the mid-2020s with completion in the early 2030s.
In the interim the UK would become more reliant on imports and flexible capacity to meet demand, a UK power trader said.
The 1.4 GW North Sea Link to Norway is scheduled to come online later this year, while linkage to the continent is set to increase further in 2023 via the 1.4 GW Viking link to Denmark.
"Higher volatility is to be expected as the large units drop off, and we become a lot more coupled to the continent," another UK power trader said.
Finally as dispatchable power stations closed, competition in the UK capacity market should decrease and clearing prices rise, supporting the investment case for flexible assets such as batteries, according to Alan Smallwood, optimization director at asset manager Anesco.