Utility Week

UTILITY Week 11th April 2014

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UTILITY WEEK | 11Th - 17Th AprIL 2014 | 13 Policy & Regulation This week Closure risk for 7GW of gas power capacity Industry survey suggests gas plant is essentially unprofitable and looking towards an SBR for value Some 7GW worth of gas-fired power generation is unprofitable and could exit the market, fresh evidence from National Grid suggests. With a capacity crunch loom- ing in 2015/16, National Grid is considering a supplemental balancing reserve (SBR) to avert the risk of blackouts. This involves paying generators to sit out of the market and be available for emergencies. An industry survey showed interest from some 7GW of plant (understood to be gas-fired) that is currently avail- able in the market, as well as 2GW of mothballed plant that could be brought back. A further 850MW to 1GW of capacity could be freed up by demand-side response. Peter Bingham, from National Grid's Electricity Mar- ket Reform project, said he was "very encouraged" by the level of interest and said it showed the market would "respond positively" if needed. But it is also a sign of how much gas generation is close to closure. Mark Somerset, vice president at genera- tor Intergen, said the results show gas plant is "essentially unprofitable and looking towards the SBR for value". The SBR "may assist some capacity" but leave the rest "poten- tially facing closure". Taking plant out of the market could squeeze capacity margins and increase prices, he warned. National Grid is still assessing whether the SBR will be needed. Government has indicated up to 300MW of extra capacity could be required this winter and 1GW the next. A spokesman for National Grid said tenders for the SBR were likely to be "highly competitive". MD See Special report, p18 WATEr Regulator confirms two as 'enhanced' Ofwat last Friday confirmed that South West Water and Affin- ity Water have been awarded "enhanced" status as part of its 2014 price review (PR14). The two companies pre- qualified for the enhanced status last month. Since then, they accepted Ofwat's guidance on risk and reward, which included a weighted average cost of capi- tal (Wacc) of 3.85 per cent. South West Water and Affin- ity are now set to benefit from a fast track through PR14 as well as financial rewards of up to £17 million and £7 million respectively. Ofwat's chief regu- lation officer Sonia Brown said: "South West and Affinity's plans really stood out." EnErgY MPs vote against price freeze again Labour's proposed price freeze for energy bills was voted down again in the House of Commons last week, but the government's majority fell to only 27. The last time MPs voted on Labour's planned energy price freeze in November, the govern- ment had a majority of 58. This time, MPs voted against the motion by 275 to 248. This followed an opposition debate on the price freeze, where shadow energy secretary Caro- line Flint said the move by SSE to freeze its prices until 2016 was proof that the energy market was broken and that a price freeze was a workable solution. Energy secretary Ed Davey once again criticised Labour's planned price freeze, calling it "a gimmick, not a policy". EnErgY Scottish innovation 'can power the world' An independent Scotland can become "the intellectual power- house of green energy", accord- ing to Scottish first minister Alex Salmond. Speaking at the Bloomberg Future of Energy Summit in New York on Tuesday, Salmond said the strength of Scotland's higher education system creates a "leading research centre". He added: "Our energy resources can power much of Europe; our energy innovation can power the world." Salmond stated that "per head of population, Scotland is the most energy-rich nation in the European Union" but also claimed that the development of energy policy has been hampered by the Westminster government. "[Independence] would allow us to adopt policies which meet our priorities and specialisms," Salmond said. "That would ben- efit Scotland, and it would also benefit our energy industry." Gas power stations are struggling to compete Political Agenda Mathew Beech "Do the Tories plan to ban new onshore windfarms?" Chalk and cheese: they go together like the Tories and onshore windfarms. The Conservatives cannot seem to separate themselves from the "menace" of onshore wind turbines. Rumours have been flying around Westminster that the blue side of the coalition will set out in its 2015 manifesto to ban any new onshore windfarms – pro- tecting rural communities from yet more blots on the landscape. This appears at first glance Subsidies for low-carbon technologies remained, includ- ing the strike price of £95/MWh for onshore wind and £155/MWh for offshore wind. And yet, to prevent the Tory heartlands becoming blighted, Cameron et al seem keen to push turbines offshore. Out of sight, out of mind, perhaps. But certainly not off con- sumer bills as the "hard- pressed" consumer faces yet more bill increases to cover the cost of saving middle England. to be the Tories shoring up their middle England vote as they bid for the elusive majority that has evaded them since 1992. But, by looking towards their traditional supporters and coaxing them to the polls come May next year, they could be alienating the centre. The hot topic for a vast swathe of the country – the "hardworking families" of Brit- ain – is ever-rising energy bills. David Cameron allegedly promised to tackle the "green crap" to bring down bills. The result? £50 knocked off a £120 increase as Eco was cut/ extended – depending on your political viewpoint.

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