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    UK Must Build Gas-Fired Power: Academic

Summary

Shrinking surplus capacity on the continent means that domestic generation is preferable to imports of electricity, according to a researcher.

by: William Powell

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UK Must Build Gas-Fired Power: Academic

The UK government's white paper on energy this summer must prioritise the construction of more gas-fired power plants, according to Tony Lodge. Writing a comment piece for The Times published February 4, the Centre for Policy Studies' researcher said that laying electricity interconnectors under the North Sea was not the answer, as the surplus electricity on the continent would shrink over time, leaving the UK vulnerable.

Last week, UK operator National Grid announced that the Nemo link, between the UK and Belgium, was open for capacity bookings. It can carry 1 GW in either direction. However, an interconnector does not guarantee electricity will flow.

In late January the German coal commission recommended the closure of the nation's coal-fired plant by 2038, while the country's remaining nuclear capacity is to close by 2022. French and Belgian nuclear capacity also faces an uncertain future.

"More interconnectors do not guarantee the once-anticipated abundant and cheap power supplies and are not a substitute for domestic generation," Lodge wrote. "This crucial issue must now be re-examined as a priority in the national interest," he concluded.

Lodge said that gas-fired power generation accounted for half the supply on January 30, with the 9,400 wind turbines just 4%. Coal, which will be gone from the UK mix  by 2025, and nuclear supplied just under a sixth each.

Although the UK's own gas reserves are in decline, major recent finds have given some grounds for thinking the decline will not be as precipitous as first thought. There is also plenty of LNG import capacity which this year has been taken up as new supplies come to the market and demand in Asia has been a little weaker.

Nuclear is another low-carbon contender, although funding projects is still risky, The UK and Hitachi broke off talks for a new nuclear plant in north Wales, the Japanese investor calling it a commercial decision, although it meant writing off the $2.8bn it had spent so far.

The Minister of State for Beis Greg Clark told parliament January 17 that he "could not justify a strike price above £75 ($98)/MWh for the financing structure, given the declining costs of alternative technologies and the financial support and risk sharing already on offer from the government which was not available for  [EDF's] Hinkley Point C." That will receive a handsome guaranteed £93/MWh when the plant  is built some time next decade, which is a lot more than the output from windfarms receives, but it does have the advantage of reliability.

The UK Department for Business, Energy and Industrial Strategy told NGW late January that the government is currently assessing the viability of a regulated asset based (RAB) funding model for future new nuclear projects  in the UK but no decision has been made on its feasibility or use for future new nuclear projects.

RAB is commonly used in the water and transport sectors. The infrastructure provider receives a licence from an economic regulator, which gives them a right to charge a regulated price to customers in return for providing the infrastructure service in question. 

Beis said this method "could play a valuable role in securing delivery of pipeline projects, reducing the cost of capital (and therefore customer bills) and providing a secure and independent supply of low carbon energy in the UK.We are currently reviewing the viability of the RAB model as a sustainable funding model for future new nuclear projects. No decision has been made regarding the feasibility or use of a RAB model for new nuclear projects. We intend to publish our assessment of this method by the summer." 

Beis confirmed that the capacity market remains at a standstill, following a state aid judgment against the European Commission (EC) on the Tempus case. "The EC has confirmed that it will be conducting an  investigation into the original State aid notification for the capacity market, and the UK government is working with the EC to ensure it has everything necessary to re-consider the case for approval of the capacity market scheme as quickly as possible," it told NGW.

It is not known whether the UK will be part of the single European energy market after Brexit but the general assumption is that it will. The UK is supposed to be independent of the EU from March 29, but even if it does leave then, there may be a transition period, depending on whether there is a deal or not.