Page 25 - Gi flipbook April 2019
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loss of the capacity mechanism income
over a prolonged period could, however,
threaten the viability of some gas plants.
The reason why the capacity
mechanism was brought in was so that
the market could continue to have an
uneconomic level of oversupply in
an increasingly renewable market for
those days when the sun does not shine
and the wind does not blow.
Left to its own devices, the market
would have been expected to see lower
levels of capacity than we have right
now as capacity levels reduced until
the point plants became profitable. The
capacity mechanism fixes the disparity
between the point at which plants
are profitable and the higher levels
of capacity required for security of
supply. As a result, without the capacity
mechanism this security of supply is by
no means guaranteed.
It’s important to remember that
gas is still vital to the overall
power mix in Britain. According
to our data, CCGT plants were
once again the dominant fuel
source in the GB market last
year, providing 37.6 per cent of
the total amount of electricity.
Renewables accounted for
31.2 per cent, while almost one
fifth (19.9 per cent) came from
nuclear plants, 6.3 per cent
from imports and just five per
cent from coal stations
As well as disincentivising existing
plants and forcing their earlier-
than-planned closure, the capacity
mechanism suspension could also
make it harder to bring new plants
to the market. This tricky situation is
exacerbated by the indefinite nature of
the suspension; at this stage, nobody
knows how long it will last. While the
European Commission has indicated it
will appeal against the ECJ ruling, this
process could take many months and
there’s no certainty that the original
result will be overturned.
Against this backdrop, however, it’s
Capacity mechanism contract holders million hole in its finances. important to remember that gas is still
will have to rely on wholesale market The build-out of renewables has vital to the overall power mix in Britain.
revenues to cover their running costs reduced the opportunities for legacy According to our data, CCGT plants were
and this will be more difficult to CCGT power plants to run, impacting on once again the dominant fuel source
sustain if the suspension is prolonged their revenues. The revenue from the in the GB market last year, providing
for more than a single year. Energy capacity mechanism income covered the 37.6 per cent of the total amount of
giant SSE, which runs coal and CCGT loss of revenue through periods of high electricity. Renewables accounted for
plants, has already revealed that the wind/solar generation and ensured that 31.2 per cent, while almost one fifth
suspension is likely to leave a £60 CCGT plants remained profitable. The (19.9 per cent) came from nuclear
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