Head of power says uncertain revenues putting large gas plants at a disadvantage

Drax has called for greater clarity over the future of the ancillary services to ensure the smooth operation of the power grid as more intermittent renewables come online.

The firm says large gas plants will have a vital role to play in maintaining system stability but have been starved of investment due to a lack of visibility over potential revenues.

Drax Power chief executive Andy Koss told Utility Week although there is an economic case for building the new gas plants – in particular combined cycle gas turbines – part of this rests on their ability to provide a wide range of ancillary services, including frequency response, voltage control and black start capabilities.

But, he added, “there’s no transparency about what they are and how much you’re going to make.”

As a result, Koss said the capacity market has favoured projects which have low capital expenditure – regardless of their whole-system benefits – especially in the south of the UK where transmission charges are reduced.

With more certainty over ancillary services revenues, larger gas plants would be able to bid into the capacity market at a lower price and outcompete the distributed peaking plants which have been big winners in recent auctions.

Head of ancillary services Ian Foy highlighted a particular issue over the market for reactive power – the ‘unproductive’ power used to push ‘productive’ power around the grid. Reactive power can be produced or absorbed by generators to control voltage, but their impact diminishes over distance like “ripples in a pond”.

Foy said uncertainty over future revenues has made it difficult to build generating plant in the north despite a growing need for voltage control: “There is not a single thermal plant, or a single controllable plant, being built north of Drax. In the last capacity market auction, nothing went through.”

National Grid expects requirements for ancillary services to rise significantly over the coming decades, but Koss said investors are unwilling to part with their cash on this basis given the price volatility in the wholesale market.

He said the system operator needs to put effective procurement mechanisms in places, offer long-term contracts or at least provide greater clarity over expected spending. “Grid are aware they need to be more transparent,” he added. “Our worry is they are not going to be transparent enough”.

Koss said clarity is needed as soon as possible so developers can decide on which “bells and whistles” to add to their projects: “You’ve actually got to build some of this flexibility in when you construct the kit.”

Earlier this year, National Grid announced plans to revamp the ancillary and balancing services it procures by – among other things – designing and implementing a new reactive power market by 2018/19.

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