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Analysis demonstrates greater diversity in UK power market

July 3rd, 2014

The latest independent analysis of the UK's electricity market shows that while coal has retained its top share of the power pie, renewables has become more influential and the market in general is displaying greater diversity.

Although renewables are becoming more of a factor, impending decisions affecting the UK’s nuclear power future may alter the picture considerably.

Despite being the biggest sources of UK energy production in winter 2013-14, coal and gas saw a large fall in levels of power generation as renewable generation levels increased from previous years.  This was the stand-out highlight of a new report by energy data analyst EnAppSys.
London at night

Despite providing 57 per cent of UK power in the six months to March 2014, coal and gas plants saw levels of combined generation fall 17 per cent on the same period in 2012-13.

The decline was attributed to a 4.2 GW fall in coal-fired capacity and rising levels of renewable generation, which reduced the need for gas-fired power during the period.

The fall came as total electricity generation at major UK power stations fell 6.2 per cent to 36.9 GW. This was attributed to a mild winter and a long-term decline in electricity consumption driven primarily by the economic slowdown and increased levels of energy efficiency.

The EnAppSys study showed that coal-fired power stations provided 34 per cent of all UK power requirements during winter 2013-14, while 23 per cent came from combined-cycle gas turbine (CCGT) units. Nuclear units provided a further 21 per cent, wind farms 10 per cent and other sources, including interconnector flows to the UK, provided the remaining 15 per cent.

Paul Verrill, Director of EnAppSys, said: “The report shows that the UK’s electricity needs are still predominantly provided by coal and gas-fired power stations, but that renewables are playing an increasingly larger role. In the winter period, when demand in the UK is at its peak, 18 per cent of total UK generation came from renewable sources (including estimates for levels of embedded generation), a big increase on the 11 per cent figure the previous year.

“We are also seeing increased levels of interconnector flows into Britain from the Continent. This has resulted in much lower levels of utilization levels at gas plants, but has increased the levels of diversity in the UK fuel mix.”

Levels of gas-fired generation would have been expected to be much higher in winter 2013-14 given the closure of several coal plants, but a 58 per cent rise in wind generation coupled with increased levels of imports and reduced levels of system demand offset these closures.

These strong levels of wind generation were attributed to an increase in the number of wind turbine installations and a higher utilization of existing units, with several offshore wind farms coming online in the period.

Verrill said: “What we have seen in winter 2013-14 has been a diverse fuel mix with generation from a variety of sources and technologies, with wind now being a major source of power generation in winter months - illustrating that it makes a useful contribution in periods of peak demand.

“Going forwards, it is important that we retain a diverse fuel mix so that we are not exposed to any vulnerability in a particular fuel type, be it a fuel supply crisis or a day in which levels of renewable generation are low.”

Power Engineering International asked EnAppSys about the prospects they can forecast for coal power over the next five to 10 years.

The energy analysts said that the future of coal plants in the UK electricity markets is ultimately decided by the economic merits of coal against gas, and while falling gas prices have resulted in increased levels of gas-fired generation in recent weeks, forward price curves appear to favour coal rather than gas-powered plants.

  The race to decarbonize is an obvious threat to coal-fired power. Over the next five to 10 years coal will be under increasing economic pressure from decarbonization initiatives, but as more coal plants close the balance between coal supply and demand shifts, reducing its price further and often balancing out the economic effect of decarbonization efforts.

“On a UK basis, the consensus is that electricity generation from coal will decline as the Industrial Emissions Directive results in reduced running hours with closures among the existing fleet, with no commercial or political will to build new coal plant,” an EnAppSys spokesperson told PEi.

In its March budget the UK government agreed to freeze its carbon price support at £18 ($31)/tCO2, which favours coal plants over a continually rising price support, but despite this move Uskmouth closed earlier this year after sales talks broke down and Eggborough may at least partially follow suit later this year as it struggles to meet emissions targets.

“Despite these closures the next five to 10 years are unlikely to see a drastic level of closures given that the UK fuel mix is already committed to managing considerable changes over this period, particularly as the current nuclear fleet reaches the end of its operational life.”

“This necessity to manage a changing fuel mix may be the key factor that ensures that any government policies are not so drastic as to force too many coal plants offline while they remain able to support a changing market,” the analysts say.

“The UK and European competitions to provide capital cost contributions to developers of carbon capture technology – by which coal generation can reduce its carbon emissions to zero – should lead to a plateauing of the reduction in installed coal capacity, and lead to the UK continuing post-2024 to have a diverse generation mix including nuclear, coal, gas and renewables.”

Apart from renewable power competitors, EnAppSys points to the looming political and legislative manoeuvres that may confirm an escalation of nuclear power in the UK as having the biggest influence on coal’s future.

“The other key factor will be any decisions surrounding nuclear installations with high levels of new nuclear capacity unlikely to favour the coal fleet, while reduced levels of new nuclear installations can only favour coal-fired plants.”

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