UK directors seek support for year-end return of ex-Calon gas plants

The directors of two 850 MW mothballed gas-fired power stations in the UK are seeking government support to bring the assets back into operation by Christmas, they told S&P Global Platts Oct. 19.

In August 2020, Calon Energy-owned combined cycle gas turbine plants at Severn Power in South Wales and Sutton Bridge in Lincolnshire were placed into administration.

Both CCGTs exited administration at the end of March 2021 with control delivered to two directors, Jeffrey Holder and Scott Magie.

"We're moving heaven and earth to get the plants ready to return to the market by Christmas," Holder said.

Before a positive decision could be taken, however, the directors were seeking support equivalent to a Capacity Market agreement from the Department for Business, Energy and Industrial Strategy (BEIS).

The power stations automatically lost their Capacity Market contracts going into administration and were unable to pre-qualify for March's year-ahead (T-1) CM auction for 2021/22 delivery.

Now they were looking to BEIS to provide "an element of revenue security so we're on a level playing field" with other dispatchable generators holding CM contracts.

"We're also talking to people about picking up CM agreements in the secondary market, but we think it highly improbable we'll be able to get the volume we need [at an acceptable price]," Holder said.

The security offered by the capacity market would be crucial this winter, Magie said.

"It's a different world now. Carbon and gas prices are through the roof and the risk profile has changed dramatically," he said, noting much higher credit requirements and imbalance exposure.

"It would be commercial madness to lock in various prices now because if we are one week late back in the market that will cost a massive amount of money," Holder said.

Likewise, if the plants returned to service on a pure merchant basis and the market changed, the assets could be facing losses anyway.

As such the directors had reached out to government, regulator Ofgem and system operator National Grid to underline the strategic relevance of the plants.

"We think bringing these assets back will save the taxpayer money. Bringing them back will certainly be more efficient and cut emissions, while adding security to the network," Holder said.

The directors were twin-tracking work on the two plants as each had its own different path back to market, but the aim was to have all four units back in the market simultaneously to reduce risk of exposure to imbalance costs, Magie said.

"For smaller operators like gas peakers, for instance, a day exposed to these imbalance prices can wipe them out. I saw this happen firsthand 21 years ago in California, where gas got so expensive the state stepped in and bought the fuel [for generators]," he said.

In terms of how the plant would be run, Magie said half-hourly flexibility was the key.

"You have to do back-to-back trading on a half hourly basis. If the gas price is moving this quickly you can find yourself upside down very quickly," he said.

Switching CCGTs on and off was expensive and put stress on the machinery, he said.

"A warm steam turbine in combined cycle is very responsive and reliable, but there are periods where something goes wrong in the start cycle. That could kill someone in an eight hour sale. So we'll be conservative in our strategy. There would probably not be a day when we bid all four units in simultaneously," he said.