The fall in demand for electricity has forced Scottish & Southern Energy (SSE) to delay the construction of a new 800 MW combined cycle power plant at Baglan Bay in Wales. The FTSE 100 utility, which supplies gas and electricity to more than 9 million customers in the UK and Ireland, announced the delay in May as it reported a 3 per cent increase in annual profit. For the year to March 31, SSE saw pre-tax profit rise to £1.64bn, up from £53m a year earlier, but this comparison was distorted by swings in the accounting value of derivatives. Underlying profit rose from £1.25bn to £1.29bn.
SSE, one of the UK's largest energy companies, was planning to commission the new plant in two stages between 2013 and 2015. The plant is now more likely to become operational in 2015.
SSE is in the middle of a five-year programme of heavy capital investment likely to cost about £6.7bn. Its capital projects include the new gas-fired power station in Marchwood, near Southampton – which last December became the first such plant to open in the UK in five years.
The company has also shown an interest in buying EDF’s British electricity distribution business, which had been expected to sell for more than £4bn, but Ian Marchant, SSE chief executive, said the price it was willing to pay had fallen after commencing due diligence: “There are just bigger challenges [at that EDF business unit] than we had thought.”
Although the economic downturn in the UK has led to a fall in energy demand, SSE beleives this to be temporary and has identified a number of options for the development of more CCGT capacity in the country. Gas fired power plants such as CCGTs will continue to play an important role in the UK and will make a growing contribution to meeting the UK's electricity requirements because of its relatively low costs, short construction time and high thermal efficiency, says SSE. CCGTs will also play an important role in balancing the UK's electricity system as the country adds more and more wind farms to the grid. Other options for new SSE CCGTs include the development of up to 850 MW at Keadby and up to 470 MW at Barking Power.
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