Risk of blackouts denied as another UK coal plant closes

Rugeley plant in Staffordshire is set to close this summer following declining market conditions for coal, after cheap gas prices and an increase in renewable energy projects have effectively priced coal out of the UK energy market. Last week, British energy company SSE announced its plans to close three of four units at its 1,995 MW Fiddler’s Ferry coal-fired plant near Manchester in April. Rugeley's closure is likely to tighten the UK's power supplies, at a time when the National Grid is putting contingency plans in place to prevent an electricity reserve shortfall over the winter months. The government has issued a new statement denying the country is at any risk of a blackout this winter after it purchased 2.4GW of extra electricity capacity. However, the plant closures mean the government may have to purchase even more capacity for 2016-17, which is likely to increase energy bills for consumers.

The government has issued a fresh denial that the UK is at risk of blackouts after one of the country’s biggest coal power stations announced plans to close.

The French company Engie said it would shut its Rugeley power station in the summer, putting 150 jobs in doubt and affecting 190 contractors.

The Staffordshire coal power plant is the latest to pull down the shutters due to low power prices and higher carbon costs, as the energy secretary, Amber Rudd, moves to phase out coal by 2025.

The closure will fuel fears of a supply crunch because it removes a gigawatt (GW) of energy from the National Grid – enough to power 500,000 homes.

The National Grid bought 2.4GW of extra capacity for this winter as part of a scheme under which it pays companies to reduce energy usage or provide more power at short notice. The scheme added an extra 50p to the average household bill this year, while the grid has also bought 3.6GW for next year, adding a further £1.50.

New coal plant closures raise the prospect that the Grid will have to buy even more capacity for the 2016-17 winter to keep the lights on. But the Department of Energy and Climate Change said Britain was not at risk of blackouts.

“We are clear that providing a secure supply of affordable energy for our families and businesses is non-negotiable. There will be no impact on this winter and action has already been taken to secure extra capacity for next winter,” a spokesman said. “We will continue to work alongside National Grid and Ofgem to take whatever additional steps are necessary to protect our energy supply.”

Ofgem said it was “confident” about next winter’s power supply but added that there was “no room for complacency”.

Engie blamed the closure of Rugeley on increased carbon costs linked to the UK’s shift to greener energy, alongside low power prices as renewable energy provides increased competition.

The squeeze on fossil fuel generators has been intensified by tougher EU controls on carbon emissions aimed at reducing dependence on fossil fuels.

“Unfortunately market conditions for UK coal plant have deteriorated rapidly in recent years, as a result of a continued fall in power prices on the back of commodity market decline, and increases in carbon costs,” Engie said. “Under such conditions, there is no prospect of the power station recovering its future operating costs.”

The energy firm, which employs 20,000 people in the UK and was formerly known as GDF Suez, said it would try to find affected staff new roles at its other plants in the UK.

Engie owns five other plants, including the 2GW First Hydro pumped storage facility in north Wales and a 1GW gas-fired power station at Saltend in East Yorkshire.

The demise of Rugeley adds to a growing list of coal-fired plants that have been forced to close. The 2GW Eggborough plant in Yorkshire and Longannet in Fife are slated to close in March, while Ironbridge in Shropshire closed last year and power supplier SSE is to close most of the 2GW Fiddler’s Ferry plant near Manchester.

The move away from coal also led to the closure of the UK’s last remaining deep coal mine in Kellingley, North Yorkshire.

Engie said it was in talks with the Department of Energy and Climate Change, but insisted there was no way to keep the plant open.

“We implemented a number of changes at Rugeley a year ago in order to help maintain operations at the site but a combination of falling prices and the impact of various market changes has now made this unviable,” the company said.

A spokesman said Engie had moved to reduce operating costs and minimise outage expenditure, but this had not been enough to make the plant economically viable.