Capacity auctions in the UK are due to be launched in 2014 to bring forward investment for new projects that will start operations in 2018 or 2019. However, this is "not fast enough" to avert the risk of blackouts amid tightening reserve margins, Keith Anderson, chief corporate officer at Scottish Power warned.
The UK Department of Energy and Climate Change (DECC) has today announced plans to exploit newfound shale gas reserves, but this may not mean cheap power. “Shale gas’s impact on price will be much less than what we have seen in the US. The roll-out is likely to be a bit slower [than in the US] due to community resistance against fracking,” Tim Yeo, Chairman of the UK Energy and Climate Select Committee said at a conference in London.
First auctions under the UK's capacity market will take place - subject to State Aid approval - in 2014, for the delivery of flexible electricity capacity from the winter of 2018-19, the government said today. The Capacity Market, along with long-term Contract for Differences (CfDs) is meant to spur infrastructure investment of up to 100 billion pounds.
The US executive's new carbon emissions rules, that will impact existing fossil-fuel power generation are seen to be "positive overall for gas-fired power and coal", said Tudor, Pickering, Holt (TPH) Energy Research. "Coal is not going to be outlawed tomorrow, a warming-up to natural gas and renewables is promoted, but this is largely rhetorical," said TPH Energy Research.
The introduction of a capacity mechanism is not absolutely necessary to spur the building of new gas-fired power plants in the UK, Clare Duffy, General Manager UK at the Irish utility Electricity Supply Board (ESB) told Gas to Power Journal in an interview.
"ESB has always been equivocal about the need for a capacity mechanism in the GB market and has demonstrated that investments can be made in the absence of a capacity mechanism through our investments in Carrington CCGT," she said.
What surprises forecasters at National Grid "is the segment of unabated coal generation, which has seen many coal plants close earlier than expected as they have already used up their allotted runtime hours," said Chris Train, Operations Director at National Grid. The British power transmission system operator had come up with three 2012 UK Energy Scenarios to evaluate the pathways towards meeting the country's renewable integration and carbon reduction targets.
As high-performance, newly built power plants are not running sufficiently to earn back investment, Lothar Balling, Siemens' Head of Gas Turbine Power Solutions, is calling on policy makers to change Germany's power market design and adopt capacity mechanisms. "Support for rapid response and reliable gas turbines and CCGTs are required to keep the power flowing," he said with reference to this year's motto of PowerGen Europe.
A critical decision on whether the EU-backed Nabucco pipeline or the Trans-Anatolian Gas Pipeline (TANAP) will emerge as the chosen project for transporting gas from Azerbaijan through Turkey to Europe will be taken before the end of June, the Austrian federal minister for energy, Reinhold Mitterlehner said in Vienna today.
Addressing delegates at Power-Gen Europe 2013, Europe's biggest trade show for the power industry, he highlighted Austria's role as hub to help diversify sources of gas imports away from Russia.
Investment in new gas-fired power plants in the UK is "critical" in the upcoming years, especially if the country is to transition to a low carbon economy, Jonathan Holyoak, Head of Gas Generation at the Department of Energy and Climate Change (DECC) told the Westminster Energy, Environment and Transport Forum's keynote seminar in London. "There is a remarkable amount of political consensus about the need to do something about [building new] gas generation...as over time we see the capacity outlook deteriorating," he said.
New investments in gas-fired capacity in the UK are being put on hold until there is clarity surrounding the government's ongoing Energy Market Reform (EMR), George Grant, Director at Stag Energy told Gas to Power Journal at the Westminster Energy, Environment and Transport Forum keynote seminar in London. "The industry acknowledges that we are waiting for the EMR, part of which is the capacity mechanism that's being talked about [and] there isn't going to be any new investment in gas until that's clarified. So the phrase that's being thrown out about there being a dash for gas is just incorrect," he said.
The implementation of a capacity mechanism as part of the UK's Energy Market Reform (EMR) should be done "as soon as possible" in order to spur investment and prevent electricity shortfalls in the coming decade, Stephen Davies, Energy and Environmental Policy at E.on UK told Gas to Power Journal at the Westminster Energy, Environment and Transport Forum keynote seminar in London. "From our point of view a capacity mechanism is necessary. It's very difficult for any investor to build right now and looking at the spark spread, the market is very challenging for gas," he said.