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Healthy UK dark spreads leading to early electricity capacity loss under LCPD

12 Mar 2012 17:24:39 | edem

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Historically wide profit margins for coal-fired electricity generators could lead to the closure of four UK power stations with a combined capacity of 6GW.

The plants, which are eating into limited running hours under the EU large combustion plant directive (LCPD), all look set to close before the directive's cut-off point at the end of 2015.

Two units at the ScottishPower's Cockenzie power station are set to cease electricity generation in the first week of April for the rest of the year, data submitted to National Grid show.

The two 300MW units will be available to generate at 270MW in weeks 12 and 13, but data show they will be unavailable for generation from week 14 onwards. Latest figures, which go forward to week 9 in 2013, show the units will remain unavailable.

The Cockenzie plant is one of seven coal-fired power stations to have opted out under the LCPD, alongside three oil-fired plants.

The directive requires polluting plants commissioned before 1987 to either install emission abatement equipment, or opt out. Opted-out plants can operate for a maximum of 20,000 hours between 1 January 2008, when the legislation came into effect, or the end of 2015 - whichever comes first (see EDEM 12 May 2011).

According to Elexon data published on 8 March, units 1 and 2 at Cockenzie had just 10% of their cumulative generation time remaining, or 1,943 hours.

A ScottishPower spokesman said only that the company would "manage its remaining hours strategically" at Cockenzie.

Over the past week, both units have been fired up consistently to generate on working days when demand is highest, while ramping down over the weekend.

Generous darks

This generating strategy is consistent with high profit margins for coal-fired generators, which have largely been running as Baseload capacity throughout the winter.

The UK front season clean dark spread, which takes carbon costs into account, ended Friday's session at £13.17/MWh (€15.69/MWh).

This was the first time the product has breached the £13.00/MWh mark, and was £11.26/MWh above the corresponding clean spark spread, calculated at £1.91/MWh.

Should the plant continue its strategy of ramping up generation on working days, this would translate to approximately 16 weeks of generation - after which point the plant would be forced to close.

Units 3 and 4 at the plant had 15% of their running time remaining, or 3,037 hours. Both units are expected to be available to generate throughout the rest of this year.

Last week, the units operated for 110 hours combined, or approximately two-thirds of their availability, which points towards an element of strategic generation at times of high demand.

Should a similar pattern continue, the units will reach the end of their allotted LCPD running time in approximately 27 weeks, giving an estimated closure date of mid-September.\

Remaining plant

Remaining opted-out LCPD plants have more hours in hand. E.ON said last week its 1.9GW Kingsnorth coal-fired plant will cease generating in March 2013. The plant has around 4,250 hours remaining, or 21% (see EDEM 9 March 2012).

RWE's 1.9GW four-unit Didcot A plant has around 7,800 hours remaining. The plant has largely generated as baseload in recent days, to take advantage of healthy dark spreads, with less volume produced at weekends.

Should such a strategy be continued, which looks likely in light of the forward dark spread curve, closure would be expected around February next year.

Of the remaining opted-out plants, only SSE's Ferrybridge units 1 and 2, each with 490MW capacity, look likely to use up their hours before the end of 2015.

The plant operated for around 70% of its available time last week, only ramping down during early morning hours on weekdays.

With around 7,900 hours remaining, or 39%, and a lengthy 20-week outage set to begin on week 18, such a strategy would translate into a closure date at the end of 2013, or mid-2014 with another summer outage next year. JS

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