British Power Market Reflects Low Carbon: Timera

The success of open-cycle gas turbines (OCGT) in the British capacity auction early March, where prices cleared at £18 ($25)/kW, "provides an interesting insight into the structural transformation of the UK power market as it decarbonises," said consultancy Timera March 15.

UK generator Drax won bids for three 200-MW OCGTs to be dotted around Great Britain. The awards will allow it to raise financing for plants that will be idle for nearly all the time once online in 2024-25.

"Older nuclear and combined-cycle gas turbine (CCGT) capacity is steadily exiting the T-4 capacity market, with the coal fleet already gone. This is being replaced by new capacity in the form of demand-side response, gas peakers, batteries and  interconnectors," it said. "The current winter is evidence of how price volatility is rising, and with it the returns on flexible capacity," it added. Reciprocating engines, which have a very low efficiency rate but can start up in a matter of seconds, are also in demand.

New and old generating capacity by type

Source: Timera

Capacity that exited the auction was dominated by three EDF nuclear units totalling 1.5 GW (at Dungeness, Heysham & Torness); two CCGTs at Rocksavage & Keadby (2.1 GW); and a pump storage unit at Dinorweg (0.3 GW).

In all 2.1GW of new and refurbished gas-fired capacity cleared the auction, including the refurbished Connahs Quay CCGT units (0.7GW) and numerous gas engine sites (0.5GW).

Below £15/kW, the fixed cost base of ageing CCGT capacity drives the exits but above £20/kW there looks to be a strong supply of new-build capacity. Greenfield CCGT projects look increasingly challenged, given growing decarbonisation risk for assets with an economic life into the 2040s. New CCGTs are also being undercut by the refurbishment of existing units (such as Connahs Quay), although opportunities here are limited, Timera said.