Coal-fired power dominates UK generation mix
By Jillian Ambrose in London
UK electricity generation shifted further from gas-fired power towards
coal-fired generation in 2012, a trend that looks set to continue in 2013 as
rising gas prices erode the profits of combined cycle gas turbine use --
allowing coal burn to soar in line with falling fuel and emissions allowance
In addition, growing renewable energy capacity has increased the
variability of the energy mix due to the intermittent nature of wind
generation to allow for a year of record lows and highs for gas-fired power
as well as oil-fired generation late in the year.
Official figures from the UK's Department of Energy and Climate Change
showed that gas burn had fallen 40.9% to 22.83 TWh by the third quarter of
2012, paving the way for ever higher year-on-year coal burn.
rose by 49.9% from the same quarter the previous year to 28.66 TWh in Q3, on
the back of favorable clean dark spreads -- the difference between the price
of power and the cost of coal and carbon. (See related chart: UK clean dark spread (GBP/MWh): January 3 - December 31, 2012).
Article continues below...
Request a free trial of: European Power Daily
European Power Daily's uniquely comprehensive package of news and pricing information, provides you with daily updates on new policies, projects, power deals, acquisitions, solicitations, alliances, regulatory decisions and evolving trading markets in Europe. It also produces market assessments from the UK, Germany, Switzerland, France, The Netherlands, Belgium, Spain, Italy, the Czech Republic, Poland and Hungary.
Clean dark spreads rockets 171%
The Platts clean dark spread assessment measures the profitability of
month ahead power generation produced at a 35%-efficient coal-fired power
plant and shows steadily growing incentive for generators to turn to
In January 2012 the average clean dark spread price was GBP8.21/MWh
according to Platts data, with prices climbing higher month on month to
almost double by May when the assessment averaged GBP15.35/MWh.
By December 24, the month-to-date average clean dark spread assessment
was GBP22.30/MWh, up 171% from the average price in January, Platts data
Cheap European coal and even cheaper EU Emissions Allowances have been
key factors driving the increase of coal-fired power generation, market
sources told Platts.
Gas generation hits 14 year lows
The Platts clean spark spread assessment -- measuring the profitability
of day-ahead gas-fired generation for power plants at 50% capacity -- was
assessed at a fraction of the value of coal-fired generation in 2012
averaging between GBP1.50/MWh and GBP3.20/MWh over the first half of the
The year-to-date average price for the Platts clean spark spread was
GBP2.52/MWh August 31 but plunged to just GBP0.29/MWh in September,
contributing to record low gas-generation levels over the month.
On September 28, UK gas-fired power generation crashed to 14 year lows
amid a perfect storm of uneconomic spark spreads, strong winds and typically
lower Friday power demand.
Gas flow analysts at Bentek, a unit of Platts, confirmed that gas
nominations from the UK's power generation sector were just 8 million cubic
meters, the lowest since Bentek began collating data at the beginning of 2008.
This fell dramatically short of the average month-to-date daily
nomination for September 2012 of 27 million cu m/day and the September 2011
average of 59 million cu m/day.
Shortly before midday September 28, gas
generation was pegged at just 5.6 GW, or 14.1% of the total generation mix,
while coal-fired power dominated at almost 50% of the mix at 19.2 GW.
World’s largest wind farm boosts output
The record lows for gas generation were set amid strong wind power
generation of 3.5 GW shortly before 12:00 BST (1300 GMT) and followed just
weeks after the start of the giant 500 MW Greater Gabbard Offshore wind farm
in UK waters.
At the time, the Greater Gabbard project was the world's largest
offshore wind farm but it was ousted from its position as the world's largest
by the London Array project in October, paving the way for a string of wind
generation records through November.
The London Array offshore wind project exported electricity to the UK
power grid for the first time at the end of October as part of its initial
630 MW capacity phase.
The 175 turbine first phase of the project, based 20
kilometers off the southeast coast of England in the Thames Estuary, was
expected to be completed by the end of the year, in line with its
construction schedule, but had already produced electricity from the 152
turbines currently in place.
As a result of the increased wind capacity November saw a flurry of
three successive wind generation records settling just above 4.5 GW November
Oil-fired power hits 2 year highs
But in December, reduced wind generation levels combined with unplanned
nuclear outages and rising winter demand boosted gas-fired generation to test
record highs for the year and forced the UK to resort to levels of oil-fired
generation not seen in two years.
Oil-fired power ramped up over the afternoon of December 12 to reach 1.2
GW, or 2.3% of the total generation mix at 1500 GMT, the first time it has
moved beyond the 1 GW mark since December 2010, according to Platts
The move to more expensive oil-fired power was believed to have a direct
impact on the UK's within-day electricity market, as power for delivery
December 12 between 1700 GMT and 1900 GMT was heard trading at GBP258/MWh,
more than four times the December 11 day-ahead price of GBP54.65/MWh.
At 1600 GMT, gas-fired generation reached 20.5 GW or 36.9% of the
generation mix, narrowly missing the year's highest gas-generation
contributions so far at 22.351 GW seen February 3, while coal-fired power
stood just slightly higher at 23.2 GW.
Just a week previously, coal had dominated the generation mix at 22.4 GW
while gas-fired power contributed just 13.5 GW.
However, as day-ahead baseload power prices lifted over 10% and the UK's NBP gas market turned
bearish amid an oversupply of gas, clean spark spread prices rocketed to just
over three times the year-to-date average, Platts data shows, supporting
greater gas burn.
The day-ahead clean spark spread surged to GBP6.5689/MWh for power
plants at 50% efficiency, in stark contrast to the November average price for
the day-ahead clean spark spread of just GBP1.88/MWh.
Next article: UK energy policy takes center stage