EPH to Demolish Eggborough Coal Station and Build Gas Plant

Updated on
  • Company to seek planning permission for 2,000MW plant in U.K.
  • Three units may be built by 2022 pending government approval

Energeticky a Prumyslovy Holding AS plans to develop a gas-fired power plant at the Eggborough facility in north-east England, where electricity has been generated by burning coal since 1970.

The Czech company’s U.K. arm, Eggborough Power Ltd, will apply to the government for planning permission for a 2,000-megawatt station, the company said in a statement. A plant of that size would equal the capacity at RWE AG’s Pembroke station, the nation’s biggest gas-fired facility. A government decision is expected in autumn 2018, the company said on its website.

Cheap gas is pushing coal out of the power generation mix with front-month contracts trading near the lowest for six years. In July, almost half the electricity delivered to the grid came from gas while 3.8 percent was coal, according to lobby group Energy U.K. The government wants coal off the system by 2025 and is encouraging new plants to be built through its capacity mechanism program, which offers payments for facilities to be available when called on by National Grid Plc.

“Like other generators in the U.K. we see the coming closure of the coal fleet,” Adam Booth, the managing director for Eggborough Power, said in an interview. “We still see a place for flexible generation needed to support security of supply and gas is really the only option.”

The company is still considering when it will close its 2,000-megawatt coal station, and its decision will depend on developments in both in power markets as well as the capacity market, Booth said. The plan to close the coal station isn’t linked to building the gas plant, he said, declining to give details about the cost of the investment needed.

Making Noise

“The coal station would have to go sometime,” Lakis Athanasiou, an analyst at Agency Partners LLP, said. “It’s better to start making noises about shutting now, and perhaps scare National Grid and the government into providing opportunities to make money now.”

The next auction for capacity contracts in 2020-2021 will be held in December. New gas-fired stations would probably need to bid as much as 50 pounds ($66) a kilowatt in order to be profitable, according to Agency Partners. Last year’s auction for 2019-20 cleared at 18 pounds a kilowatt. Sanford C. Bernstein & Co. LLC forecasts the next auction will clear at 55 pounds.

EPH will build an underground gas pipeline to connect the power station to the U.K.’s gas transmission network. Eggborough Power is “currently undertaking technical and environmental studies to identify the most appropriate location within the Eggborough Power Station site for the proposed gas-fired power station,” it said in a statement.

The new plant won’t be operational until 2022 at the earliest, by which time the coal-fired station will be decommissioned, the company said.

EPH plans to build three combined-cycle gas turbines. It is also considering an extra facility that can provide so-called black start services that the grid can use in an emergency.