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UK 2013 electricity capacity loss extends with 1.6GW Didcot closure looming

03 May 2012 17:54:09 | edem


The UK's electricity generation capacity is set to be cut by an additional 1.6GW from April 2013 with the likely closure of RWE npower's Didcot A coal-fired power plant.

Didcot A is burning through its limited running hours under the EU large combustion plant directive (LCPD), and the likely loss reflects the rate at which historically high profit margins for coal-fired power generation are eating into the UK's available power production capacity.

An RWE npower spokeswoman told ICIS on Thursday: "We think that we will be in a position to run down our remaining running hours by next April."

According to system operator National Grid's latest transmission entry capacity (TEC) register published on Monday, the Didcot A coal-fired power plant will require no TEC as of April 2013. The plant has 1,558MW of TEC reserved until this date.

The 1.6GW comes on top of the 4GW capacity loss that was revealed in the previous TEC register, published at the start of April (see EDEM 3 April 2012), bringing the total loss next April to 5.6GW.

But the RWE npower spokeswoman added the TEC reservation could be further modified later this year to reflect changes in market conditions. At this stage, it is "not a closure announcement", she said.

Earlier this year, ICIS estimated February 2013 as Didcot A's likely closing date (see EDEM 12 March 2012).


Under the LCPD, polluting power stations commissioned before 1987 - coal and oil plants in the UK - are defined as existing plants. Such plants can either comply with the LCPD by installing emission abatement equipment or opt out of the directive.

Opted-out plants can operate for a maximum of 20,000 hours between 2008 - which was when the legislation came into effect - or the end of 2015 - whichever comes first (see EDEM 12 May 2011).

According to data published by National Grid subsidiary Elexon on Tuesday, Didcot A had 6,378 running hours remaining, or 32% of its allotted total. At the beginning of March, the plant had 7,801 hours, or 39%, of its remaining total.

The use of 1,423 running hours - or 7% of the 20,000 total - in a little over two months reflects the rate at which the station is burning through its allowance in light of very high profit margins for coal-fired generators.

On Wednesday, the front-season clean dark spread, a measure of profit margins for coal-fired power generators, was calculated at £21.05/MWh (€25.89/MWh).

This was £20.89/MWh higher than the equivalent measure for gas-fired power generators, the clean spark spread, which closed at just £0.96/MWh.

Should Didcot A continue to generate as baseload, which looks like a certainty when forward dark spreads are taken into account, it will have burnt through its remaining LCPD hours by late February 2013, giving an effective closing date of early next year.


The RWE npower spokeswoman said the utility may extend the life of Didcot A beyond April next year, but only pending unexpected events, such as a major unplanned outage,

Even a drought, which the UK is at risk of this summer, may mean the plant extends its life, because this would limit the amount of water that the station could draw from the neighbouring river Thames for cooling purposes.

Alongside the loss of capacity at Didcot, ScottishPower's 2,304MW Longannet coal-fired plant will see 20MW shaven from its TEC, while SSE's Griffin wind farm, which had 204MW in reservation, has reduced that figure by 15MW to 189MW.

Some trading sources have openly stated that the loss of supply has not been sufficiently priced into the UK power forward curve.

Department of Energy and Climate Change (DECC) papers released on Wednesday said that it "anticipates current excess capacity margins will decline later in the decade as a result of the retirement of existing coal and nuclear plants", therefore increasing the wholesale baseload price of generation, and, eventually, contributing to a recovery in spark spreads (see EDEM 02 May 2012). JS

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