This means the number of coal power stations open in the UK will fall from 10 this year to 8 next year. This includes Longannet's intention to close by March 2016.
In practice this means the UK carbon tax is very likely to stay, capacity payments to coal may not be so generous in the future, and the Government will be keener to impose tighter air pollution limits. Utilities are slowly waking up to that fact that coal power stations are not wanted, and the Government is more likely to turn the screws further, than to throw them an olive branch.
Image of Ferrybridge by William on Flickr, used under a Creative Commons licence
Ferrybridge was not awarded a capacity contract for 2018. It is interesting to note that the capacity payments for 2018 – which would give a 1GW power station £19.4m – almost exactly offset the estimated loss of the power station of £20m/year (i.e. £100m over 5 years).
So if coal power stations are losing money at a huge rate and the Government is unlikely to help, the natural question is… who is next to close?
There is a further 4GW of coal capacity that also did not get generous capacity payments in 2018. These are:
West Burton Unit
Fiddlers Ferry Unit
However – the list doesn’t even stop there. Since the power stations must endure 3 years of loss-making until capacity payments begin in October 2018, even those with capacity contracts may close. This is because there are no financial penalties for pulling out of the capacity contract (losses are capped at the payments), and they are also transferrable (there is a lot of gas plant that didn’t qualify in the auction, but will still be available).
This could open up RWE to closing Aberthaw, or even Drax to begin closing units.
With the UK general election now past, the outlook for coal in the UK is unlikely to change, so we can expect more announcements soon.