Eggborough power station will shut down unless government steps in to save it, after a surprise rule change last month left it ineligible for “go-early” subsidies.

Eggborough Power has scrapped plans to keep its Yorkshire coal power station alive by converting it to run on biomass. The independent generator, which accounts for 4 per cent of UK generation capacity, had investment and construction contracts in place to start work on 6 January. However, a surprise decision by ministers to cap the amount available for “go-early” support contracts left Eggborough’s scheme high and dry. It lost out to another biomass conversion at nearby power station Drax.

Neil O’Hara, chief executive of Eggborough, said: “Unless a viable solution is found with government, the most likely outcome now is that Eggborough will no longer be supplying electricity to the grid beyond 2015. Impending EU regulation and the escalating impact of the carbon price floor mean this is unfortunately the rational economic conclusion based on the information we have available at this time.”

The project’s cancellation will mean the loss of around three quarters of a billion pounds of investment. China General Nuclear Power Group, one of the investors in a new nuclear plant at Hinkley Point, was lined up to invest half a billion pounds in Eggborough’s conversion, a source close to the matter told Utility Week.

Some 800 onsite workers will lose their jobs. The biomass conversion was expected to directly employ a further 800 people and thousands more in the supply chain.

Yorkshire MPs wrote to energy secretary Ed Davey in advance of his department’s decision, urging him to save the scheme. “Should this project not proceed, thousands of direct and indirect jobs will potentially be lost in our constituencies, as well as a senseless missed opportunity to create thousands more across the core industries in which our region has such a long and proud heritage,” they wrote.

Although it has lost out on the go-early process for contracts for difference (CfDs), the project could yet be rescued if the government finds an alternative way of assuring investors the plant would get subsidies for running on biomass.

Davey told Business Green there were other ways it could get support. “If all the projects above them [on the priority list] get the early go-ahead they wouldn’t be able to get a go-early CfD,” he said. “However they would be able to go for a Renewable Obligation Certificate or they could wait until next autumn and get a CfD which will be in the normal way – the enduring regime.”

The timing is critical, however. In the absence of a clear signal the plant has a future, the company is already cancelling planned upgrades.

One unit will be closed from September, taking 500MW offline just as the UK faces a capacity crunch. The rest is expected to shut down before the end of 2015, as the carbon floor price makes it uneconomic to run on coal.

It is the latest in a number of large scale biomass conversion projects to bite the dust, including Tilbury, Rugeley and Ironbridge.

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