The UK government “will stand with you as you build new gas fired power stations,” Claire Coutinho MP, Secretary of State at the Department for Energy Security and Net Zero (DESNZ) announced to developers in a high-profile speech at the Chatham House think tank on 12 March. Investors, she said, “should be ready too”.
“We need to make use of the main flexible power source we have today – gas” said Ms Coutinho, as DESNZ published a second consultation on wide-ranging Review of Electricity Market Arrangements (REMA).
There is general consensus that GB will require gas fired stations until at least 2035 - the system operator estimates 25-27GW will be required and a National Infrastructure Commission analysis estimates 22-28GW. The REMA consultation said: “Based on retirement rates for our existing gas power stations, we believe delivering this level of unabated gas capacity would mean building some new gas projects”.
The consultation proposes to refine an existing mechanism designed to bring forward new gas firing stations – the Capacity Mechanism (CM), which in fact has seen higher prices to support new-build in this year’s auction for delivery in 2028, as concern rises around potential capacity shortages towards 2030. The CM has been largely ‘technology agnostic’, but DESNZ now proposes to set some ‘minimum procurement targets’ for specific technologies within its auction, allowing for multiple clearing prices. This will allow it to favour characteristics of gas-fired plant, such as the speed at which assets can respond to signals and the ability to sustain capacity over a prolonged period of time.
After a consultation last year the government said that CM participants with multi-year agreements running beyond 2034 would have to meet tighter emissions limits, which would limit gas peaking plants to 750 hours per year. Now the government has pushed back the earliest date that would be imposed, from the 2024 auction (delivery in 2028) to the 2026 auction (delivery in 2030).
Other aspects of the REMA consultation, including new methodologies to assess future capacity requirements and a shift to zonal pricing, could also affect decisions on new gas plant.
Coutinho also insisted that the longer term objective of Net Zero remained and she had warm words for two options to operate gas-fired plants without carbon emissions – carbon capture and storage, or using hydrogen fuel – that the government hopes will provide industrial opportunities for UK PLC.
Image: Claire Coutinho MP (courtesy of Wikimedia Commons)
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