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12 | 17TH - 23RD FEBRUARY 2017 | UTILITY WEEK Finance & Investment This week DG's lower cost base gives capacity edge Peaking plants well positioned to win capacity auction contracts in a volatile energy market Small-scale distributed generation has a "fundamental cost advantage" in the capacity market and will continue to crowd out larger plants in future auctions, Aurora Energy Research has told Utility Week. Analysts expect 11GW of distributed generation (DG), batteries and demand-side response to enter capacity auctions over the next decade, even if the government makes policy changes to boost prospects for combined-cycle gas turbines (CCGTs). The fundamental advantage, according to Aurora consultant Felix Chow, is that "embedded plants have lower overall costs to be able to provide capacity that is running for very few hours each year". Around 1.3GW of new DG – mainly gas-fired reciprocating engines – won contracts in the four-year- ahead (T-4) auction in December, along with roughly 770MW in the year-ahead (T-1) early auction that was held last month. Aurora senior project leader Hugo Batten said two factors were driving the success of these peaking plants: "The first is that system just needs capacity that is competitive at load factors below 15 to 20 per cent. The second is that we think some market participants are betting there'll still be scarcity in the system and some non-delivery on previous capacity market contracts, which means we'll still see these very high price peaks we've seen over the last few winters." He said that the peaking plants – as their name suggests – will be well placed to take advantage of future price spikes. TG WATER Severn Trent cleared to buy Dee Valley Severn Trent has been given the final all-clear to purchase water-only company Dee Valley, aer shareholder opponents confirmed they would not appeal a High Court decision. Severn Trent was embroiled in a bidding war with infrastructure investor Ancala in its attempt to acquire Dee Valley. Severn Trent's initial offer to buy the company was outbid by Ancala, forcing Severn Trent to raise its offer. Its bid on 23 November 2016 was accepted in principle by Dee Valley. The legal challenge had been mounted aer the chairman of a Dee Valley emergency general meeting called to vote on the bid excluded some shareholder votes from the decision. ELECTRICITY Small Scottish renewables crippled The development of small-scale renewable schemes in Scotland is being threatened by crippling hikes in business rates, which could hit ambitious renewable energy targets north of the border, trade body Scottish Renewables has warned. According to figures from Scottish Renewables, smaller hydro, solar and wind schemes face increases in business rates of up to 650 per cent as a result of a wider revaluation of business rates announced by the Scottish government in December. Alba Energy, which represents hydro groups, said that rates bills could account for more than a quarter of its member businesses' annual turnover as a result. The hike follows Holyrood's 2015 withdrawal of a relief scheme to assist green generators. Scottish Renewables has has urged Holyrood to reconsider its decision not to introduce transitional relief. ELECTRICITY New CCGT to enter capacity auction A project to build a new 470MW gas plant near Immingham in North Lincolnshire is in a "good position" and should be able to participate in this winter's capacity market auction, the developer, CGen, has said. The North Killingholme combined-cycle gas turbine (CCGT) plant will be built next to the site of a CCGT plant that closed in March 2016. "We are now in a good position with the project and we will be working hard over the coming months to be fully prepared for the capacity market auction in December," said project director Florent Maes. Large plants are losing the auctions battle Stock watch 250 240 230 220 TOSHIBA SHARE PRICE, 14 FEBRUARY 10am 12pm 2pm 500 400 300 200 TOSHIBA SHARE PRICE, THREE MONTHS TO 14 FEBRUARY Dec 2016 Jan 2017 Feb 2017 Shares in cash-strapped Toshiba took an 8 per cent dive on Tuesday 14 February aer the release of preliminary financial results was delayed and a £5 billion write- down on its US nuclear subsidiary Westinghouse was confirmed. Toshiba said it would "consider" a continued role in the Moorside nuclear plant in Cumbria, following a review of its overseas nuclear plants, and reportedly suggested that it might sell Westinghouse to balance its books. yen yen