London, 22 May (Argus) — UK utility Scottish and Southern Energy (SSE) will hold off investment in new UK gas-fired capacity until 2015 but is investing in Ireland where there is a capacity mechanism, the company said in its annual report.
SSE is considering new combined-cycle gas turbine (CCGT) projects in Great Britain, for both the medium and long term, including sites at Abernedd in south Wales, Keadby in Lincolnshire and Seabank in Bristol. But although projects such as Abernedd are close to being “shovel ready” and others such as Keadby 2 are at an advanced stage of development, “unless there is a significant change in UK government policy around EMR [Electricity Market Reform] and the timing and operation of a future capacity mechanism, and clear market signals suggesting the need for increased gas-fired generation capacity, SSE does not expect to take any final investment decisions to construct these projects until at least 2015,” the company said. “This will effectively mean no new capacity will come into operation until 2017-18 at the earliest, given the lead times for constructing new CCGT plant.”
The company also cites the UK carbon tax, which came into effect from 1 April, as deterring investment decisions. “Uncertainty about future political intervention in the setting of the price floor limits the impact of the tax as a market signal to further the stated policy objective to provide an incentive to invest in low-carbon power generation by providing greater support and certainty to the carbon price in the UK's electricity generation sector.”
But in Ireland, the company has a 460MW CCGT under construction at Great Island in County Wexford that it acquired in addition to 1,068MW of operational generation assets from Spanish utility Endesa last year. SSE spent €59mn on development of the project from October 2012 to March 2013 and the plant is scheduled to be commissioned in the second half of 2014, at which time the 240MW fuel oil unit at the site will be decommissioned. SSE expects to incur capital expenditure of around €140mn (£110mn) over three financial years to complete the construction.
“The Single Electricity Market in Ireland has an effective capacity mechanism in place. This mechanism was an important factor in SSE's decision to progress with the Great Island development and means it is able to proceed with investment in new thermal electricity generation plant in the Irish market, which is in contrast to the position in respect of the Great Britain market.”
In the next months, SSE will be concluding a trial investment on one 485MW unit at its coal-fired Fiddlers Ferry site, which, if successful, will reduce the emissions of NOx and provide the option of increased generation under the EU's Industrial Emissions Directive (IED) transitional national plan. Further investment in similar technologies could be extended to the other three units at the plant, as well as to the two remaining units at its coal-fired Ferrybridge plant, the company said. “At a low capital cost, this investment may provide SSE with significant optionality to operate this coal-fired plant up to and beyond 2020.”
All of the capacity at Fiddlers Ferry and the Uskmouth coal-fired plant and half of the capacity at Ferrybridge (over 3,300MW in total) is in compliance with the large combustion plant directive (LCPD). All this plant has also been opted into the transitional national plan under the IED, which provides a number of alternative options for how they will operate through to at least the end of June 2020. SSE said it has not made a decision on how the plant will operate and this will depend on market conditions and the effects of any future capacity mechanism.
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