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The UK’s inefficient power plants are steadily closing down. What will replace out-of-favour coal generation and what are the implications for SMEs?
As Eggborough in Yorkshire becomes the latest coal-fired plant to be declared uneconomic and scheduled for closure (not least because of incoming stricter EU rules on air quality), there are questions over UK energy supplies this winter.
The National Grid has been keen to stress the low risk of blackouts (or ‘brownouts’) but not everybody is convinced. A recent report showed margins of error that would be a concern for many.
It is far from clear that blackouts have been avioded. Jefferies, the investment bank, calculates that for 2016-17 just 53 gigawatts of capacity will be available to meet forecast peak demand of 56GW, according to a recent FT story by Christopher Adams. “This would be the first time in living memory that the UK could not cover peak demand with dispatchable generation,” said Peter Atherton, the bank’s utilities analyst in the FT’s analysis.
Hopes are increasingly pinned on gas fired power stations.
The ‘gas revolution’ has had significant benefits for many (especially the US). But, while gas prices are still low enough to make gas UK business electricity generation viable in the UK, the pace of building of new gas power stations is too slow to take up the slack left by the abandonment of coal.
A move to renewables has also been touted as heralding the future of cheap business electricity. However, renewables still have a long way to go before they can provide enough reliable power, not least because of the heavy reliance on gas-fired heating. A recent paring back of Government subsidies will likely constrain the rate of growth in renewable business electricity generation. A lack of expensive energy storage infrastructure also acts as a restriction.
Over the longer term, better cross country links – known as the ‘supergrid’ – will help flatten out peaks and troughs in renewable energy generation and match areas of unmet demand with areas of oversupply.
For the UK, the elephant in the room is nuclear power.
As a pioneer of nuclear power, the UK still generates about 17% of power from nuclear sources, far below France’s more than 75% but still placing the UK in the top 20 nuclear generators.
Yet, here too, uncertainty reigns.
Many nuclear energy plants are ageing and a wave of acquisitions has changed the ownership of many nuclear assets several times in recent years. Concerns over safety that mounted in the wake of the Fukushima disaster have contributed to a dearth in funding for nuclear.
French energy group EDF is leading the construction of the first of a new generation of UK nuclear plants at Hinkley in Somerset. The involvement of Chinese partners has raised eyebrows and delays mean the 2023 target completion date has been dropped.
Criticism of the £24.5 billion plant has centred around the Government’s guarantees for both loans and the price of electricity generated, which is substantially above commercial electricity rates. The Government has stressed the secure, low carbon nature of the electricity generated.
Government plans to ‘double down’ and get Chinese companies to build other new reactors, according to an FT story by George Parker and Christopher Adams, are seen by many industry figures as ill advised.
While business electricity suppliers have adequate power to meet demand, prices rises are likely to remain modest. Taking advantage now could be a sensible strategy as an array of unpredictable events can influence business electricity tariffs.
Even those locked into a long contract could find that paying the exit fees still leaves them significant savings. And doing this comparison doesn’t have to be onerous: just 20 minutes is enough for us to quickly compare business electricity suppliers and switch you to a new deal (with us taking care of the paperwork). Give us a call on 0330 0100 251 (or request a call back using our form).
Find out more about business electricity at our dedicated page.
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EXCELLENT CUSTOMER SERVICE
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