SSE says it will most likely be closing the 1995 MW Fiddler’s Ferry coal-fired plant from April 1, despite gaining a government capacity contract designed to incentivise back-up plants to stay online.
Energy analysts EnappSys said the move by SSE indicates that “the penalties for the Capacity Mechanism have been too low.”
The plant’s owners say the four decade old station, located in Cheshire, northwest England, has been loss-making for two years and the capacity auction inclusion is unlikely to change the pattern.
“The plant at the station is aging, its method of generating electricity is being rendered out of date and it has been, and is expected to continue to be, loss-making,” said Paul Smith, managing director of the generation business at SSE, in a statement.
The proliferation of renewable energies and emergence of cheap gas prices, along with a government diktat to completely close coal-fired power plants within a decade have all conspired to force the decision.
SSE is prepared to close the plant in April despite having to incur a penalty charge of around £33m ($48 million) if it breaches the capacity contract by closing the units.
The fourth generation unit at Fiddler’s Ferry is contracted by network operator National Grid to provide market balancing services during the winter of 2016/17.
Rob Lalor, Energy Analyst with EnappSys energy data agency told Power Engineering International the decision by SSE could open the door for other operators, as the energy gap threatens to widen.
“If someone drops out the expectation would be that the volumes would be sold in the T-1 auction which might interest people who won new contracts in December’s auction to build quickly or encourage older plants to stick around after Supplemental Balancing Reserve contracts.”
“Fiddler’s Ferry has a contract one year and none the next so is a fairly unique case, but the other risk would be Trafford Power. That could leave a large gap to fill in the T-1 auction so that would make things quite interesting. It really highlights that the penalties for the Capacity Mechanism have been too low,” Lalor added.
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