A surge in British wind power capacity will erode returns for operators of gas and coal plants over the next three years as their plants increasingly serve to balance intermittent renewables, claims RenewableUK.
UK wind capacity is forecast to rise by 50 per cent to 8.5 GW by late 2012, or about 13 per cent of installed capacity, said the industry group. But the British power grid could need a major overhaul to accommodate this capacity.
“Over time intermittent generation will change the structure of gas plant returns as they face reduced running hours and less certainty as to when they are likely to generate,” Olly Spinks, director at consultancy Timera Energy, told Reuters.
Proposals to reform the electricity market include a mechanism to reward operators for holding spare capacity for balancing low renewable energy output. But this policy will not come into force until about 2014, which could hit thermal plant operators’ margins in the meantime.
Britain’s Renewable Obligations programme demands that power suppliers will have to source a growing percentage of total supply from renewables. The obligation in England and Wales is currently about 12 per cent until March 31, 2012.
But the UK’s ageing transmission grid is impeding the growth of wind generation. The National Grid has had to pay wind farm operators in Scotland to switch off turbines as overproduction threatened to block the grid at night, when demand drops.
National Grid plans to invest £2.2bn ($3.4bn) in three major projects over the next decade, which includes nearly doubling power export capacity between Scotland and southern England to better distribute growing volumes of renewable electricity.
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