Last hurrah

Coal-fired plants battle for final, lucrative contracts ahead of 2025 ban

BRITAIN’S last remaining coal-fired power plants have lined up to compete for lucrative supply contracts in the early 2020s in a last hurrah before the Government’s coal power ban in 2025.

Over 10GW of power capacity from six coal-fired plants has pre-qualified for an auction early next year to clinch supply contracts for 2021 to 2022 which could be worth £200m.

To date the auctions, held since 2014, have resulted in more than £445m being paid to coal-burning power stations. If the next auction result is similar to previous years this amount will grow to £650m, according to analysts at the Energy and Climate Intelligence Unit.

SSE’S Fiddler’s Ferry coal plant in Cheshire and EDF Energy’s Cottam plant near Retford both missed out on contracts to supply power in the previous auction for 2020 to 2021 but have returned in the hope of clinching contracts for the year after.

Last month analysts warned that government’s decision to hold carbon taxes steady through the early 2020s rather than raise the cost to gradually drive coal plants off the system before the 2025 cliff edge would encourage coal plants to continue competing for contracts. EDF Energy’s West Burton coal plant also qualified for the forthcoming auction alongside the Aberthaw and Ratcliffe coal plants owned by German energy giants RWE and Uniper respectively. Drax has also prequalified for the auction with the coal units it has not yet converted to run on biomass pellets.

Also hoping to snap up contracts are a deluge of new market entrants who have entered battery storage units to the auction in the hope that they will earn money by releasing stored power back to the grid when needed.

Around 4.7GW of storage pre-qualified alongside 11.4GW of new gas-fired power, and 4.3GW of smaller gas engines on top of projects which already exist in the market.

The battery boom has helped drive the amount of pre-qualified power sources more than 50pc above the Government’s target to lock in just over 50GW of capacity, suggesting the auction may be more competitive than in previous years and drive a lower price.

But government officials are poised to reveal new rules for how battery owners are paid for their power via the auction.

Depending on the guidelines many battery providers may find that the terms are not economic and opt to drop out before the auction.

The final register of power plants entering the February auction will be published near the end of January.