The storm clouds are gathering over UK electricity generating capacity. The government seems paralysed by the absurd belief it can ‘save the climate’, or something.
Urgent government intervention is required to ensure that current uncertainty in the UK market is replaced by developer confidence, writes Paul Webber.
The recently confirmed closure of all large UK coal-fired plants by 2025, along with the planned closure of older and less efficient gas-fired plants, means Britain should be investing in large-scale replacement capital power.
Yet the ongoing delay in constructing the new nuclear plants that will replace the advanced gas reactor (AGR) nuclear fleet, which is nearing the end of its life, means the UK will become more and more reliant on building additional modern and efficient combined cycle gas turbine (CCGT) plants to meet its electricity needs.
Lack of certainty in the regulated power market has meant that private developers, including the so-called ‘Big Six’ utilities, are currently struggling to build new large-scale gas-fired power plants.
Meanwhile, existing coal plants and some gas plants must close in order for the government to meet its commitments to environmental targets. Urgent government intervention is required to ensure that the current uncertainty in the market is replaced by developer confidence, and that a realistic timeline is established that will deliver the necessary construction of new-build capital generating capacity.
A recent paper by the Institution of Mechanical Engineers points to a potential UK electricity shortfall, as existing coal-fired power plants are phased out by 2025, existing nuclear plant is decommissioned and newbuild nuclear continues to be delayed. The UK potentially needs up to 30 new CCGT power plants to fill the gap, but the problems in achieving this target are numerous.
Worryingly, the 2014 and 2015 capacity agreements for coal-fired generation showed a drop in capacity from 9.2 GW for 2018/19 to 4.6 GW for 2019/20. This is going to be further exacerbated by the impact of The Industrial Emissions Directive (IED), which came into force on 1 January 2016 and will force the closure of virtually all existing coal and a number of gas plants on or before 31 December 2023 under the ‘Limited Life Derogation’ option.
The total capacity of coal-fired generation with agreements for 2019/20 is just 7 GW, approximately.
As a result, the UK may need many more newbuild CCGT developments to replace this capacity. Given a typical four-year period to design and construct a CCGT plant, these newbuild projects must start now if they are to be completed in advance of the coal station shutdowns.