‘Dash for gas’ era of UK CCGTs faces crunch decade

27 November 2017 06:42 Source:ICIS

Anxiety around supply security in the 2020s has focused primarily on the UK government’s 2025 target for phasing out the country’s remaining 14GW of coal plant. On top of this, processes remain to extend the lifespan of some of EDF’s 9GW of nuclear capacity.

While the coal phase-out and failure to secure life-extensions at some nuclear plants could leave the UK with a gaping supply hole, little attention has been paid to the potential retirement of CCGTs built amid the ‘dash for gas’ in the 1990s. Gas-fired plants typically have a lifespan of between 20 and 30 years.

Highlighting the extent of the problem, 43% of current CCGT capacity was built before the year 2000 (see table).

However, not all CCGTs built in the 1990s remain open as evidenced by the closure of the 1.87GW Teesside power station in 2013 and both the 665MW and 900MW Killingholme plants, operated by Centrica and Uniper respectively, in 2015.

Other CCGTs have had periods in mothball as operators struggled to make them profitable in a market transforming from its dependency on conventional thermal generation to increasing renewables.

While mechanically still fit-for-purpose, the plants that have closed were increasingly unprofitable in a market alien to the one they were commissioned for. Built for baseload operation and unable to respond flexibly to a more volatile market, it is a problem that could spiral for other old CCGTs as more renewable generation comes onto the system over the next decade.

According to analysis by RWE, around 70% of the existing CCGT fleet will be beyond expected life in the mid-2020s.

Calling time

Some established generators in the UK have already called time on largescale thermal generation and decided revenues can be acquired from other emerging areas of the market.

Centrica sold its Langage and South Humber Bank plants to Czech-based utility EPH, who are establishing a presence in the UK market, in the summer. Built in 2010, Langage is likely to be commercially viable into the 2030s.

Engie also sold their Deeside and Saltend plants to American fund Energy Capital Partners earlier this month. The fund has a footprint in the American energy market but this is its first venture into UK energy and as yet, there is no indication what their futures will be. Deeside was listed by Engie to be withdrawn from the market at the start of next April.

Upgrades

Other operators have decided to press ahead with upgrades to improve efficiency, flexibility and reliability. Uniper contracted GE late last year to upgrade its Enfield and Grain CCGTs, work which will be completed over the next two years.

RWE is also expecting to remain in the market for the long haul and expects both Pembroke and Staythorpe plants to operate into the 2030s depending on market conditions.
An upgrade was also recently completed on its Little Barford CCGT, which means the plant can operate until 2026. Work on the Great Yarmouth plant will also be undertaken next year to ensure the plant continues operating in the 2020s.

ScottishPower, whose fleet of three CCGTs is between 15 and 25 years in age, is also intent on upgrading to remain in the market.

“There is ongoing investment at ScottishPower’s CCGTs with the stations planned to be operational through the next decade and in compliance with environmental legalisation,” a spokesman said.

Other operators are coy about committing to plans beyond the next capacity market delivery year ending 2022.

“Beyond this, the plants are subject to prevailing market conditions and with no visible market pricing into the 2020s it is difficult to say with a high degree of certainty that the plants will remain open throughout the 2020s,” a spokeswoman for Intergen, which operates three CCGTs, said.

A spokeswoman for SSE did not comment beyond saying the company had no closure plans for any of its CCGTs.

While the decommissioning risk of gas plants in the 2020s hovers over the market, development options for new CCGTs are plentiful. Around 20GW of new gas-fired generation has planning consents while several other projects are in the planning system.

However, investment to take them onto construction has been stifled as the capacity market is yet to deliver a sufficiently high auction price for annual availability. henry.evans@icis.com

By Henry Evans