Consented gas plant ‘won’t be built until EMR completed’

The gas industry has warned ministers that the biggest barrier to new investment in gas generation is the continued uncertainty over the detail of electricity market reform.

That was the key message from the Gas Forum in its submission to the Department of Energy and Climate Change’s (Decc) call for evidence over the role of gas in the power market.

The trade body insisted that switching from coal-fired generation to gas-fired generation would “help decarbonise the electricity system at a lower cost in the short to medium term”.

But it told Decc that the biggest barrier over investment in new gas plant was “the significant uncertainty around the EMR and regulatory interventions. Current oversupply and relative commodity prices of gas, coal and carbon notwithstanding, it is unlikely that parties will invest until the details of the [EMR] scheme have been settled”.

The Gas Forum’s warning came as the Government insisted there was no looming generation gap in the second half of this decade because of what energy minister Charles Hendry told MPs was the “demand destruction” of the past few years.

Hendry accepted that a generation capacity gap could open up around the turn of the decade and into the early 2020s. “That would be our working assumption at present” he told the Commons energy and climate change committee.

He went on to argue that the current proposed emissions performance standard for new gas plant would give investors the required certainty. “One of the challenges we face here is there is quite a lot of consented gas plant, which is simply not being built. As much as anything that is due to the fact that the spread prices are pretty low at the moment, and therefore people are burning coal rather than gas.

“If we want that new plant to come forward, then there has to be an understanding of when they might be required to retrofit carbon capture and storage technology. If we need gas to fill the challenge that we have in the shorter term, then we have to give a long-term picture for the investors” Hendry told Parliament.