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Blow to UK energy plans as new gas plant in doubt

Exclusive: Developers of gas-fired plant that could power 2.2 million homes admit project is behind schedule and yet to secure investors

The Government’s plans to keep the lights on have suffered a fresh setback after it emerged the only new large gas power station due to be built in coming years is now in doubt.

Energy firm Carlton Power was awarded a subsidy contract by the Department of Energy and Climate Change last year to build a new 1.9 gigawatt plant at Trafford in Greater Manchester – big enough to supply power to 2.2 million homes.

The £800 million plant was due to start generating in October 2018, but Carlton Power told the Telegraph it could no longer meet that date – and had so far failed to secure financial backers for the project to go ahead at all.

Mike Benson, Carlton Power’s business development director, said securing investment had proved “more difficult than we would have hoped” due to a combination of long-term policy decisions that had skewed the market, and uncertainty caused by recent cuts to wind and solar subsidies.

The Trafford plant had been supposed to begin construction this summer after getting a subsidy contract through the Government’s ‘capacity market’.

The scheme is designed to ensure there will be enough power plants to keep the lights on by paying their owners to guarantee they will be available.

arlton Power signed up to build the Trafford plant in return for subsidies of more than £30 million each year for 15 years. On top of the ‘retainer’-style payment, it would then get revenues from selling electricity into the wholesale market.

Mr Benson said long-term political intervention through “continuing direct subsidies for low carbon technologies such as wind, nuclear and solar” skewed the wholesale power market, making the price artificially low and making it harder to invest in gas plants.

“Despite the widespread acceptance of the need for new gas fired generation, there is no market signal to support that investment,” he said.

He added: “The recent changes in government support for renewables is an issue that concerns the investors we are talking to, as this demonstrates an increase in political intervention and uncertainty over the long term structure of the UK market.”

If Carlton Power fails to secure investment for the Trafford plant by next summer its subsidy contract will lapse and it will face an £8 million penalty.

Ministers would then be left to make up any shortfall in electricity supplies for 2018 by offering subsidies to other plants, such as old mothballed coal or gas plants, or diesel generators.

 

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BDC 299 December 2022