Britain’s energy situation goes from tight, to critical, with an announcement from SSE.
The Telegraph reports tonight that SSE has decided to close three out of its four units at the Fiddler’s Ferry power station.
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.”
As reported by the Talkshop in November, the National Grid has only recently been in emergency measures (NISM) to ensure the lights stay on. This may now become common practice.
You have been warned. Get ready for next winter.
P.S. Just to add to the 24 carat, fur lined, ocean going cock-up, that is the UK energy policy; EDF appears to be in a panic over building Hinckley Point C. With Yet another delay.