National Grid has predicted another tough summer for coal plants in the UK, some of which may be forced to close temporarily as they struggle to turn a profit.
The system operator expects them to be less cost-efficient than gas plants throughout the season for both baseload and peak generation.
“Based on the current price spread, all gas-fired power stations would be able to make a profit this summer for running at peak,” National Grid said in its latest summer outlook. “In addition, almost all gas-fired power stations would be cost-efficient for baseload.”
But by contrast, National Grid said it is unlikely that “any coal-fired power stations would be able to generate a profit if providing baseload or for running at peak”.
It continued: “Due to the relative profitability of gas-fired generation, we anticipate that some coal-fired power stations will choose to temporarily shut down over summer 2017. This means that these units may require up to 48 hours’ notice before they are ‘warmed’ and ready to generate again.”
This disparity is partly down to the higher carbon costs faced by coal plants, which are typically have much higher emissions than gas plants. The resulting displacement of coal by lower-cost gas contributed to record low levels of coal generation in the summer of 2016.
Forecast profitability of coal and gas-fired power stations during summer 2017
Source: Summer Outlook 2017, National Grid
National Grid also predicted that the level of demand placed on the transmission network will continue to fall this summer, just as it has in previous years. “This downward trend is largely due to an increase in embedded generation, particularly solar photovoltaic (PV), as well as a decrease in underlying demand”, the outlook explained.
Last summer’s minimum demand was 16.8GW – or 17.8GW when adjusted for weather conditions – and National Grid expects the figure be 500MW lower this summer at 17.3GW.
“In order to balance the system, we will need to curtail flexible generation,” the system operator forewarned. “It may also be necessary to instruct inflexible generators to reduce their output during these periods of low demand.”
As well as using the balancing mechanism or direct trades, National Grid said it may also call upon its new demand turn-up service, for which an auction was held towards the end of last month. Bottlenecks in sections of the network, most likely relating to excess wind generation in parts of Scotland, could necessitate both local and national curtailment.
It similarly predicted a fall in peak demand this summer, which it expects be 600MW below the adjusted peak demand for the previous summer at 35.7GW.
Erik Nygard, chief executive and co-founder of flexibility provider Limejump, commented: “National Grid’s summer outlook demonstrates that the low carbon transformation the UK energy system is now fully underway and finding flexibility is crucial to avoid power cuts during the summer months.
“Batteries, businesses and smaller generators are now able to support National Grid thanks to their ability to flexibly adjust output. [This] is a cost-effective and low carbon way to balance the system.”
According to the summer outlook, forward power prices for the season are higher in the UK than in France or the Netherlands. This is the case for both baseload and peak times.
“Although the difference in prices for baseload is greater than in previous years, the difference for peak times is smaller,” National Grid said. It therefore predicted “full imports” via the interconnectors linking Britain with France and Netherlands but with “some volatility in flows during peak times”.