Over the last week we have seen many reports regarding “Blackout Britain,” the concern that the UK will face blackouts over a lack of supply. The lack of supply comes of course from the EU directive in the shape of the Large Combustion Plant Directive.
The closure of coal fired power stations this year and in the future has not been replaced. It was thought that gas fired power stations would fill the void, however there are two factors that cause concerns for the UK.
The price of coal continues to decline. Today it is now below $75 a tonne. The result is that, coal fired stations are now running at the highest output they can. The weather in February and March caused prices to go to near record highs, allowing coal stations to maximise on the opportunity.
Where does this leave gas powered stations? Margins on gas powered generation are not as appetising as previously thought. The spark spread, the gross margin of purchasing gas and selling electricity, has rarely gone over £10/MWh. There have been times when it has gone into minus numbers as it did in March on more than one occasion. As a supplier, they have to decide if it is truly economical to operate existing stations, let alone construct new stations. Both Centrica and SSE have mothballed part of their portfolio and will shelf future projects. According to the SSE chief executive Ian Marchant, he said it created the “very real risk of the lights going out.”
Can renewables bridge the gap? Not realistically on a national level. However on a local level, every consumer can now look closer at self-generation to avoid their own lights going out. In India, Tata Group was on a separate grid generating its own power, whilst the rest of the entire state was in a blackout. Energy security will continue to be in the headlines on both an international and national level. The question is, will you look at it as well?