Coal news and updates

National Grid’s decision to grant lucrative contracts to two large British coal-fired power plants, helping keep them open, shows it is in a “blind panic” about electricity supplies next winter, according to industry insiders.

At the end of last week, National Grid, which runs the UK electricity network, granted two services contracts — one to Fiddlers Ferry in Cheshire the other to Drax in North Yorkshire.

 

The deals will ensure in an emergency the power stations are able to start up again without electricity from the grid, which would be essential in a national power outage.

But industry insiders believe that with electricity supplies looking tighter than ever, the contracts are designed to make sure the plants stay open over next winter. National Grid denies this, saying the companies won a competitive bidding process.

 

Fiddlers Ferry owner SSE said last week that the deal had been an important factor in its decision to keep the plant open, having previously said it could close.

 

As ageing coal plants shut, hit by low electricity prices and tough new emissions rules, government ministers have struggled to incentivise companies to replace them. Amber Rudd, energy secretary, has said she wants all coal-fired power to close by 2025.

Energy experts say it is unusual for such “black start” contracts to be given to coal-fired generators. Coal plants are generally the largest power stations but it takes longer to get them running — four hours, according to one industry executive, compared with just minutes for a hydroelectric pump storage plant.

 

An executive from one of the “big six” energy suppliers said: “We would not normally expect these contracts to be given to coal stations, and for enough money to make sure an entire power plant stays open. This looks like blind panic from National Grid.”

Another called the move “suspicious”, saying he believed the grid had simply run out of capacity to get the country through next winter. National Grid denied this and said it will update the market later this year with what it expects supply margins to be.

National Grid did not say how much the contracts were worth, but analysts said they expected Drax’s revenues to be £10m higher as a result.

 

Deepa Venkateswaran, an analyst at Bernstein, said: “National Grid would have awarded these contracts anyway. But the timing of them [just before Fiddlers Ferry was due to close], and their recipients, suggest they did not want any further plant closures.”

Others have complained that the bidding process was conducted in secret, meaning that companies trading wholesale electricity were blindsided by SSE’s decision to keep Fiddlers Ferry open.

Sara Bell, chief executive of Tempus Energy, which provides electricity through the wholesale markets, has asked the competition watchdog and Ofgem, the energy regulator, to investigate.

“This is a bilateral, behind closed doors transaction, in support of a coal plant that only a few weeks ago stated it could not continue to operate,” she said.

“Worse still, the sudden nature of the deal announcement has moved the market, to the detriment of other market participants.” She said Tempus was also considering a legal challenge.

National Grid denies the allegations. It said the contracts were not unusual and the two companies had won a fair bidding process. “A competitive process was launched for these services in February with the relevant information sent to all industry participants,” it said.

“Contractual terms are commercially confidential, but we can confirm that the contracts are structured in such a way as to minimise any potential market distortion.”

Source: Ft.com