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Eggborough, a 2GW coal power plant, announced today it would close this year.

Eggborough is 51 years old, and was living on borrowed time:

  • It was due to close in 2015, but was bought out just in time by a Czech billionaire in 2014, who kept it open, after it failed to win government support for a biomass conversion.
  • It was due to close in 2016, as the carbon tax stepped up in April of that year making it unprofitable, but National Grid panicked and paid it £60m to stay open during the winter of 2016/17.
  • And it would have closed in 2017, however, the UK Government unexpectedly decided to bring forward the start of the capacity market by a year, Eggborough bid successfully and secured payments to stay open in until September 2018.

Eggborough was contracted by National Grid from October 2017 to September 2018 to provide enough capacity to keep the lights on, although it generated just 0.3% of the UK’s electricity last year. Today’s closure announcement happened an hour after National Grid revealed that they had contracted enough capacity from October 2018, without needing Eggborough.

So how can Eggborough close now, without the lights going off? Well, the main differences in the capacity auction between the 2017/18 results, and the 2018/19 results announced today are as follows:

  • Peterhead (SSE), 1180MW, won a one-year contract. This is a reprieve for the power station after it was threatened with closure last year when it missed out on a contract. It is a 36-year-old gas power plant but it underwent a major re-powering project to improve efficiency in 2000. It is the last of Scotland’s power stations to use fossil fuels.
  • About 300MW more “new-build” plant was contracted this year. This is mostly small gas reciprocating engines that had contracts from October 2019, and will instead be commissioned ready for October 2018 to take advantage of more generous embedded benefits which are being gradually phased out from 2018-2021.
  • The remaining difference in capacity is that National Grid realised it needed to procure less capacity this year than they did last year.

So the UK’s carbon price is working: making sure that it is dirtier coal power plants that are closing, rather than gas power plants.

coal contracted 2018 capacity market by Sandbag

Two more coal power plants have no capacity contracts from October 2019 – Cottam and Fiddlers Ferry – so their closure is hanging in the balance.

Importantly, next week, the main capacity auction for 2021/22 will take place. It will be interesting to see if more coal plants get crowded out by other forms of capacity. Only 7GW of coal plants won contracts for 2021/22 – Drax, Ratcliffe, Aberthaw and West Burton.

So again, more coal could be set to close ahead of the official 2025 phase-out.

So far, no new large gas power plants have been contracted to replace retiring coal plants. And – despite 10GW entering into next week’s auction, and a further 10GW in planning (including at Eggborough itself) – it is possible they will be undercut by other cheaper technologies.