The GB electricity market is not yet ready to get rid of its coal

In 2019 the GB market went a total of 18 consecutive days without any coal contributing to demand and 83 days without coal throughout the year as a whole. This was hailed as a great turning point and a sign that soon there would be no more of this highly polluting fuel on the system at all. Indeed, the economics of coal-fired generation are dire and more plants have closed or announced closures ahead of the October 2024 deadline for all coal plant to close, however, a closer look at the continuing contributions made by coal suggests things may not be as simple as that.

The first chart below shows the declining contribution made by coal-fired generation over the past 5 years, and indeed the decline as been steep. The second chart takes a closer look at its daily average use in 2019, and while there are indeed periods of low use, there seems to be a persistent need for coal plant to be dispatched.

If the market was ready to give up its reliance on coal, there would be no need for it to be used in the summer, when renewable generation in particular ought to be high, and able to push coal out of the merit order. Yet, even on days where imbalance prices went negative due to excess renewable generation, coal units were still running.

Focusing on the summer, the above chart indicates that throughout June and August there was consistent use of coal, and that the most utilised plants were located in Nottinghamshire. Speaking with operations staff working elsewhere in the Midlands, I’m told there is a specific network constraint in the area which necessitates their dispatch – I would welcome comments from any readers with more insight into this.

This makes me wonder whether the otherwise surprising decision by SSE to go ahead with a new CCGT at Keadby before it’s success in the recent capacity auction was linked to an expectation that it would participate in managing this local constraint. Keadby 2 first received planning consent back in 1993, and its FID was made in 2018 when there were no clear price signals to support its construction. Developer SSE may have had in mind the closure of local coal plant in its decision, and the potential to replace them in the various balancing and ancillary servcies markets as well as local constriant management. The plant is set to open in early 2022.

Last June, Fiddler’s Ferry announced it would close by the end of March, with Aberthaw also closing by the end of Winter 2019, transfering its capacity contracts to third parties. Cottam was shut down at the end of September 2019, and began de-commissioning, with demolition expected in early 2021.

Of the remaining coal-fired power stations,

• West Burton A has capacity agreements all units for the delivery year ending in September 2021 and is committed to honouring these. The future of the plant will be reviewed beyond that date.
• Ratcliffe-on-Soar secured new capacity contracts in the T-3 auction held in February (units 2 & 3) for delivery in 2022/23 in the T-4 auction in March (units 1, 2 & 4) for delievry in 2023/24, and there are no current plans for closure before the 1 October 2024 deadline. Plans are being considered to replace the plant with a new energy-from waste facility after this time.
• Drax has announced that it will cease commercial coal operations by the end of March 2021 and all coal generation will end in September 2022 with the final maturity of its capacity contracts.

While it is surprising to see coal winning new capacity contracts in this year’s long-term capacity auctions, the last in which coal is eligible to take part before the 2024 closure date, with coal still running regularly even in the summer, there are real questions as to whether the system can actually cope without it.

There were very few days this last winter without some coal use, with its contribution to demand being as high as 9% on some days (the intraday high was 10.4%), so it’s clear the GB system is still very much reliant on coal. With only three plants remaining, and Hinkley Point C unlikely to open before 2025, we can expect National Grid to be calling on reserves more often.