SSE could extend LCPD derogation on two UK plants into 2009
Scottish and Southern Energy (SSE) could extend the derogation of its two plants: Fiddlers Ferry and Ferrybridge into 2009, if it wishes to, the Environment Agency (EA) has told ICIS Heren. However, SSE inferred that the plants will be running as normal by 15th September.
If a further extension is required to the end of the year, there would be a limit of 2,000 hours for the full twelve months, the EA stated.
On Friday, SSE’S Ferrybridge plant should have been back online and operating as “business as usual”. However, after its second extension last month, the utility company has until September 15th to complete the fitting of Flue Gas Desulphurisation kit. The equipment is part of the solution to reduce sulphur and nitrous emissions to levels set by the European Union’s Large Combustion Plant Directive (EU LCPD).
“What’s unusual is that beforehand the two plants had different deadlines. But now, SSE has brought Fiddlers Ferry and Ferrybridge inline, expecting the plants to be ready at the same time,” one market observer told ICIS Heren, who considered that the practice of extending the article 5 (1) of the LCPD was not fair to the other power stations that managed to meet the January 2008 deadline. SSE would not comment on specific details about the timescales of work on the two power stations.
Plant profitability during derogation
The plants have been running dependent on the market signals. During recent weeks, the UK power near curve has been in steepened backwardation. This triggered the plants to run recently during peak demand, taking advantage of relatively higher spot prices, according to market participants. Several plant outages in the UK system and maintenance work on the UK-France interconnector “expensive” plant has made up the power margins, and the two SSE plants have been operating as peaks shaving units. Some have considered that the plants are profiting from the derogation. One banker said: “The low load derogation has effectively allowed them to optimise their FGD fitting contract against the market. Where it is more profitable for them to run rather than take outage to fit FGD, they do. This would be fine if it was 2007, but they are taking an unfair advantage of the free option the low load derogation and the EA has given them …. Normally, how they optimise their outages and this kind of profit taking would not be a problem, but it is post LCPD implementation and they should not be allowed to capitalise on their environmental complacency.”
However, taking into account recent bull runs across all fuels, one utilities analyst said: “I would not want to delay bringing plants on stream in this pricing environment”.
The EA told ICIS Heren that “most plants have experienced delays in fitting FGD and SSE has stated they need longer to complete their fitting. If they wished to extend their derogation into 2009, then a pro rata allowance would be calculated for that time”.
“We believe that operating under Article 5(1) is a significant constraint and that there is a strong incentive for SSE to come out of the derogation by fitting the FGD as soon as possible.” CA
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