Peterhead power station has received another snub after a bid to supply energy capacity in the UK was unsuccessful.
The SSE-owned power station was edged out in the UK government’s “fierce” Capacity Market auction which concluded on Thursday.
The auction to secure backup power across the UK for 2019/20 was completed below last year’s price at £18 per kilowatt, costing consumers less money. But critics said it sent a message to investors that building new, greener thermal power plants in Britain is less lucrative than ever.
The outcome of the auction came after the government’s surprise move to cut £1billion in funding to develop carbon capture and storage (CCS) projects.
A CCS joint venture between Shell and SSE at Peterhead had been the front-runner in the competition before the axe fell, leaving the future of the gas plant uncertain.
SSE said that the latest decision would not affect existing operations of the plant, which was recently upgraded to offer additional capacity under the National Grid’s Supplemental Balancing Reserve (SBR) programme for 2015/16.
Paul Smith, SSE’s managing director of generation, said: “The GB Capacity Market, now in its second year, is designed to keeps the lights on at the lowest cost to the customer whilst ensuring generators are fairly remunerated for the service they provide to help meet the peaks in customers’ requirement for electricity.
“Whilst Peterhead was unsuccessful in securing a capacity agreement this time round it doesn’t affect existing operations at the plant, as the Capacity Market Auction is just one of multiple options available to the station.
“In addition to its ability to operate in the market, Peterhead has secured a number of contracts to provide support services to National Grid.”
He hinted that the government’s recent move to phase out coal-generated electricity in favour of gas would be beneficial for Peterhead.
“Thermal generation is continuing to operate in very challenging market conditions. However, the UK government has said that gas-fired generation will be central to a secure energy future. Against this background, and following this year’s auction round, SSE will consider the options for the future of operation of all its power generating plant, including Peterhead,” he said.
Power generators including Centrica, SSE and Drax won contracts in the auction for a total of 46.35 gigawatts (GW) of power plant capacity. For the first time, operators of interconnectors to France and the Netherlands, such as National Grid , also won contracts.
Energy Minister Andrea Leadsom said: “This result represents a good deal for customers – fierce competition in the capacity market has driven down costs, meaning future capacity has been secured (at) the lowest price possible.”