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Interview up a new supply chain, with all the associstructure was fine to encourage new entrants, "It is fine to think about ated port arrangements and logistical combut at the same time you could see National capacity markets, but this plexities. It would be "an exciting industrial Power and Powergen closing old, inefficient project", says Riley, but there is "still not an plant. This is the first time the market has had is just a bit knee-jerk" altogether clear regime for the reward". to be redesigned to encourage investment. It Then there is the question of whether to feels as though we are in an area that is much invest to keep Rugeley running on coal, which has been more regulated." complicated by a recent Lords addition to the governRiley is wary of this shift. "I think you would find ment's Energy Bill. GDF Suez has provisionally told the most people in the industry still believe in the free margovernment it is minded to install the NOx abatement kit ket. In that context, any intervention should be treated needed to keep the plant open under the Industrial Emiswith caution. I do think there is a danger we are going sions Directive. However, peers have voted to extend the slightly too far." Emissions Performance Standard from new coal plant In particular, he is critical of National Grid's "supto old ones making "significant upgrades". That would plemental balancing reserve", a short-term measure to limit the running hours of plant opting in to the directive. ensure sufficient spare capacity in the coming few years, "The amendment is designed to get even opted-in before longer-term arrangements to support security of coal plant to close earlier," says Riley. "It cuts coal out of supply kick-in. Riley says this will encourage inefficient the mix, where it could otherwise contribute to security plant to stay on the system while dampening market sigof supply. We understand the need for decarbonisation, nals to bring on new generation. "It is fine to think about but believe coal can continue to play an important role." capacity markets – that is a long-term solution that is The Lords amendment, which was something of a thought through – but this is just a bit knee-jerk." surprise addition to the Bill, could yet be reversed by the Beyond the UK, GDF Suez is one of the "Magritte" government in the Commons. "It would have an impact group of ten European utilities lobbying for an end to if it was not overturned," says Riley. "I am not sure we renewables subsidies and a Europe-wide capacity mechfully understand the details at this stage… but it would anism to avert the risk of blackouts. The backlash follows mean there is no benefit to upgrading NOx equipment. the closure of an estimated 51GW of combined cycle gas Our understanding is that [the Department of Energy and turbines (CCGTs) across the Continent that have become Climate Change] is not in favour." unprofitable in a market flooded with subsidised wind One of the things Riley is hoping for from government and solar. reforms is a more liquid and transparent market. While Is the Magritte group fighting the inevitable? A recent he defends the vertically integrated companies from the analysis by Citi concluded the available market for Eurocommonly levelled charge of rip-off profits, he says they pean power utilities will halve in the next 20 years, as should be more open for the sake of trust in the indusdistributed generation and demand reduction squeeze try. "We don't have the direct interaction with residential them out. Unsurprisingly, Riley disagrees. "On the basis customers, but we are certainly affected by the reputaof what is happening in Europe – if you take Germany, tion of the industry at large. While there is not much say – yes, there has been a big increase in distributed we can do in terms of interface with the residential cusgeneration and we have seen the impact on thermal tomers, we certainly need to be engaged in the debate. plant. I still believe there are economies of scale in therTo that end, I don't think the margins that the big six mal generation that distributed generation won't be able make are extortionate, but perhaps the industry needs to to replace." develop more transparency." Conventional generation in the UK is not in quite such Outside the UK, Riley's main interest is in Turkey, a parlous state, renewables growth having been slower which is starting to shift its electricity market away from than in some European neighbours. Nonetheless, despite state backing and control. GDF Suez has stakes in two an anticipated shortage of spare capacity mid-decade, gas-fired power stations and owns a gas distribution short-term price signals have led to the mothballing or network in the country. There is a chance to pass on the closure of a number of gas-fired power stations. GDF Suez UK experience of liberalising the market, he says. "With has officially closed its mighty 1,875MW Teesside station. those long-term assets, they will come out of contract at "On the positive side, the UK government is rying t the end of the decade, so we will need to be in a position to address the fact that the market is not ncouraging e to market that power in a free market. That is the focus." n ew-build," says Riley. "It is taking a lot longer than As the UK turns back to state intervention, Turkey is anticipated," but government plans to introduce a opening up. It'll be just like the good old days, maybe. c apacity market to pay generators for being available, even if they only run part-time to back up renewables, are "a good idea". UK Generation assets in operation In any case, Riley's focus in the UK is on making the Asset Fuel type Ownership Electricity (MW) most of existing assets. There are no immediate plans to Gross Net ownership build new CCGTs, although "in the medium term, it is probably still the technology of choice". In fact, the only Crimp Wind 100%2 2 projects under construction are 41MW of onshore wind, Deeside Natural gas 75% 515 386 which he sees as relatively low risk. "We have had the EggboroughCoal 10%1,960 190 review of the Roc [old subsidy] regime, so there is that First Hydro Pumped storage 75% 2,088 1,566 stability in the short term and it is a more mature techFlimby Wind 100%6 6 nology than offshore… We think onshore wind will conIndian Queens Fuel oil 75% 129 97 tinue to be part of our growth focus in the UK." RugeleyCoal 75%1,026 770 The company must also decide in the next couple Saltend Natural gas 75% 1,197 898 of years what to do with Rugeley, as European legislaScotia/CraigengeltWind 100% 20 20 tion limiting coal emissions takes effect. It has ruled out UK total 6,943 3,935 c onverting it to run on biomass. That would entail setting 10 | 29th November - 5th December 2013 | UTILITY WEEK