SSE Takes Risk with New CCGT: Timera
UK generator SSE two weeks ago said it will invest in a new combined-cycle gas-fired power plant (CCGT) costing £350mn ($467mn) at Keadby in Lincolnshire, eastern England.
Consultancy Timera Energy in a market blog posted June 4 argued that the £8.40/kW clearing price in this year’s capacity auction presents a serious roadblock for new CCGT projects, so is curious why Keadby-2 it is going ahead in the absence of its own 15-year capacity agreement. It suggests that future power prices could be supported by structural drivers.
“Lower variable cost coal and CCGT plants are retiring and being replaced by high variable cost engines, demand side response (DSR) and batteries. This is set to support peak prices, driving value into the top 20% of hours of the price duration curve,” Timera argued, adding: “Keadby 2 will be the most efficient CCGT in the market when it’s commissioned.”
Nonetheless Timera says the CCGT will face margin risks over its lifetime, and so “paying back a high proportion of its capex in the first five years will be key to mitigating these risks.”
Timera also says that Keadby-2 plant installer Siemens may provide some kind of favourable deal, and that using the brownfield Keadby site would make it cheaper. The full blog can be accessed here.
Update: Siemens in a statement issued June 5 said it will start construction this summer of the Keadby-2 CCGT, noting: "Commercial operation of Keadby 2 is scheduled for 2022 as coal power plant closures come into effect." Siemens said it will provide a full turnkey solution for the power plant, which will include the world’s first deployment of the 50Hertz version of its SGT- 9000HL gas turbine. The 840 MW plant will have 63% electrical efficiency, it added. Also included is a 15-year long-term service contract, the first long-term program (LTP) for an HL-class gas turbine in Europe.
Willi Meixner, CEO of Siemens Power and Gas said: “In June 2017, we announced to validate the technologies of our new HL-class for the 60-Hertz market at Duke Energy’s Lincoln County site in North Carolina in the United States. Now the cooperation with SSE for the 50-Hertz version of our HL-class is another milestone in our roadmap to further drive leading performance of gas-fired power generation."
(Banner photo of CCGT turbines courtesy of Siemens)