Carlton Power told the Telegraph that its Trafford gas-fired power plant has still not been able to secure the investment needed to drive the £800 million project forward, meaning it will not be available to supply power by its contracted 2018 start-date.
The news confirms concerns reported by Utility Week last year that UK generators would continue to face challenging market conditions despite the auction contracts. And it raises fresh concerns about the UK’s wider security of power generation supply if investment in new gas-fired power fails to come forward.
Critics warned last year that the auction would needlessly reward existing power plant – which would have been available to the market even without a contract – and fail to bring forward investment in much needed new power capacity.
The auction results showed that 49.3GW of power supply secured contracts for 2018/19, at a support price well below the expected payout of between £25-40/kW, at just £19.40 per kilowatt per year.
At the time Baringa partner Phil Grant said: “The challenge for asset owners and project developers is that this capacity auction has not provided the cure to the challenging economics.”
Grant said that the low price level means generators may need additional support – either from further capacity payments or higher wholesale prices – to avoid having to shut down capacity.
“A clearing price of £19.40/kW is below the annual fixed costs (e.g. salaries, connection costs, insurance, ongoing maintenance) of the majority of generating plant. This implies that to remain economically viable in 2018/19, generators must be looking to make money elsewhere,” Grant said.
Carlton Power’s business development director Mike Benson told the Telegraph that a combination of shaky investor confidence in the UK’s energy regulation and artificially low wholesale power prices as subsidised renewables play a larger role in the market were partly behind the struggle to secure financing.
The government’s provisional auction report shows that 12.9GW of refurbishing plant was successful compared to just 2.6GW of new build capacity. Meanwhile, existing plant dominated the auction at 68 per cent.
Of the total capacity, 45 per cent is gas-fired power while coal and nuclear capacity make up 19 and 16 per cent respectively.