Eggborough Power Ltd.’s coal-fired power plant in the U.K. will probably shut in 2015 unless it receives government subsidies to pay for a planned conversion to burn biomass, potentially adding to power costs.
The U.K. government may only provide money to Drax Group Plc to convert half of the nation’s biggest coal-fired plant to burn biomass as its conversion is more advanced than Eggborough’s, Jessica Lennard, a company spokeswoman based in London, said by phone. If the plant shuts by 2015 under emissions-curbing rules, it may boost wholesale power prices by 10 percent, or 5 pounds ($8.14) a megawatt-hour, she said.
Power supply margin in the U.K. may fall below 2 percent this winter in a high demand scenario, according to National Grid’s winter outlook. That compares with a minimum of 7 percent last year. Eggborough represents 3.5 percent of peak demand, according to the company.
“This decision looks like it will cost tax payers and bill payers materially more than necessary to achieve decarbonization and security of supply,” Neil O’Hara, chief executive officer of Eggborough said in a statement.
U.K. power for January rose 0.7 percent to close at 54 pounds a megawatt-hour, the highest for the time of year since 2008, according to broker data compiled by Bloomberg.
The government is expected to send a letter to all renewable energy projects vying for state support on Dec. 19 saying whether they meet the criteria for funding or not. There are too many projects and not enough funding, Lennard said. An official at the U.K’s Department of Energy and Climate Change couldn’t immediately comment when reached by phone today.
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