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Centrica boosts electricity peak selling as spark spreads fall

23 Feb 2012 13:53:08 | edem

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UK energy giant Centrica weathered a storm of tumbling profit margins for natural gas-fired plants in 2011 by selling more electricity generation volume into the peaks market, the firm said on Thursday.

Centrica, one of the UK's "Big Six" utilities, revealed on Thursday its average spark spread value fell by 13% year on year, from £11.60/MWh (€13.71/MWh) in 2010 to £10.10/MWh in 2011.

However, the figure was well above the average baseload market spark spread, Centrica said, which partly protected its gas-fired power production business from weak generation economics.

The average UK front season spark spread outturned at £8.45/MWh in 2011, according to ICIS Heren data, while the Day-ahead spark spread averaged £9.01/MWh.

The Day-ahead spread crashed from £16.45/MWh on 30 September to £2.76/MWh on 8 December - an 83% fall - reflecting the weakness of short-term sparks in the second part of the year.

The Centrica result - coupled with its acknowledgement that "the outlook for gas-fired generation remains weak" - underscored the reasoning behind the firm's continued move to reconfigure the flexibility of its gas-fired power generation fleet.

Plant closures

Centrica said in October it was "likely" to close its gas-fired power plants at King's Lynn and Barry, which total 555MW in capacity, citing no prospect of a medium-term improvement in spark spread values (see EDEM 17 October 2011).

This was confirmed on Thursday, when the company published its financial results for 2011. It has also reconfigured gas-fired plants at Peterborough, Brigg and Roosecote, with a combined capacity of 909MW, to operate in the short-term operating reserve market.

The impact of low spark spreads on the peak generation market emerged when UK transmission system operator National Grid issued its first power system warning of the winter.

At its peak on the day, flexible but inefficient open-cycle gas turbine (OCGT) power plants were generating at 711MW - more than twice the previous high recorded through the winter, and the highest level of OCGT generation since the start of 2011 (see EDEM 14 February 2011).

Strong nuclear output

Centrica also said its 270MW Lincs wind farm had suffered a minor delay because of "unfavourable weather conditions". Lincs is expected to generate its first power in the second half of 2012, and is to be fully operational by the first half of 2013.

Gas-fired power generation volumes for 2011 fell by 34% year on year, from 22.8TWh to 15.0TWh.

Total power generation amounted to 26.7TWh, down by 19% from 2010. Nuclear and wind power production both increased.

"A strong performance from our share of nuclear assets more than offset the impact of weak market conditions for our gas-fired power stations," the company said.

Full-year adjusted profits rose by 3% to £1.3bn, boosted by oil and gas production and higher wholesale commodity prices. JS

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