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Finance & Investment This week Power station faces closure after biomass conversion misses out on 'go-early' subsidies Subsidy cap scuppers Eggborough's future Eggborough power station will close unless the government steps in to save it, after a surprise rule change last month left it ineligible for "go-early" subsidies. Eggborough Power has scrapped plans to keep its Yorkshire coal power station Eggborough: rule change surprised investors operating by converting it to run on biomass. The independent generator, which accounts for 4 per cent of UK generation capacity, had investment and construction contracts in place to start work on 6 January. However, a decision by ministers to cap the amount available for go-early support contracts left the scheme high and dry. It lost out to a biomass conversion at nearby power station Drax. Neil O'Hara, chief executive of Eggborough, said: "Unless a viable solution is found, the most likely outcome now is that Eggborough will no longer be supplying electricity to the grid beyond 2015." Cancellation would mean the loss of about £750 million of investment. China General Nuclear Power Group, one of the investors in a new nuclear plant at Hinkley Point, was lined up to invest £500 million in Eggborough's biomass conversion, a source told Utility Week. Some 800 on-site workers will lose their jobs. The conversion was expected to directly employ a further 800 staff and thousands more in the supply chain. Although it has lost out on the go-early process for contracts for difference, the project could be saved if government finds an alternative way to assure investors the plant would get subsidies for running on biomass. MD Stock watch As Eggborough Power fights to keep its Yorkshire coal plant alive, the fortunes of neighbouring Drax keep rising. Drax shares leapt 16 per cent to top £8 in December, as government announcements cemented its sector-leading position. Its biomass conversion won "go-early" approval for subsidies, energy secretary Ed Davey officially opened some of its facilities and it was confirmed as a frontrunner in the carbon capture and storage competition. 18 | 10th - 16th January 2014 | UTILITY WEEK electricity Capacity measures 'jeopardise trading' Energy regulators have warned that proposed and operating capacity mechanisms in the European Union could jeopardise investment and trading in power generation. According to the Council of European Energy Regulators (CEER), "poorly designed capacity measures" devised by individual EU member states "may risk distorting electricity trading, generation and investment decisions". The comments came in CEER's response to the European Commission's recently published package of proposals on public interventions in electricity markets. CEER called for better co-ordination between neighbouring transmission system operators, national regulatory agencies and member states in defining the cross-border rules for capacity mechanisms. GAS Centrica's finance director moves on Centrica has announced that its group finance director, Nick Luff, will leave the company by the end of the year. Luff has been appointed chief financial officer at Anglo-Dutch information company Reed E lsevier, and will take up his drax share price, 6 december - 6 january new position after leaving Centrica, which will be no later than 31 December 2014. A search for a new chief finance director is underway at Centrica, but in the meantime Luff will assist "with an orderly transition to his successor". GAS Shale gas will cut energy bills, say fund managers Most city fund managers believe UK shale gas will cut energy bills, according to a survey by Capital Spreads. Of the 200 fund managers surveyed, 11 per cent said domestic shale gas production would send energy costs "significantly lower" and 48 per cent said there would be a slight cut. Another 36 per cent said it was unlikely to make any difference. Meanwhile, an analysis in the Financial Times concluded that the shale revolution in the US had benefitted consumers more than investors or producers. The sector had been a victim of its own success, pushing gas prices so low that companies have seen limited returns. Nick Lewis, head of trading and market risk at Capital Spreads, told The Telegraph the survey showed "major City investors view shale gas as a possible silver bullet". drax share price, 6 october - 6 january 810p 800p 780p 760p 740p 720p 700p 680p 660p 640p 800p 790p 780p 770p 6 Dec 20 Dec 6 Jan 6 Oct 18 Nov 6 Jan