The Scottish Energy Minister is today pressing for urgent talks with his UK counterpart over the future of Longannet power station and implications for UK energy security following the announcement by Scottish Power that the UK’s transmission charging regime is threatening the future of the Fife plant.
Longannet has a generating capacity of approximately 2,400 MW and is the largest power station in Scotland, providing on average 10 terawatt hours (TWh) of electricity per year – enough to power more than two million homes.
But its geographic location greatly disadvantages the station compared to other thermal power stations located in southern England, due to the current UK electricity transmission charging regime. Longannet faces a transmission penalty of £40 million per year, solely because of its location.
The Scottish Government has campaigned for reform of the controversial transmission charging regime for years – as it penalises Scottish electricity generators in comparison to those in southern England. In Longannet’s case the extra charges amount to £40 million per year. Scottish generators account for around 12% of the capacity connected to Britain’s high-voltage electricity network, but pay around 35% of the charges.
Scottish Power said the decision not to put Longannet into the UK Government’s Capacity Market auction for the delivery of electricity generating capacity for the winter of 2018/19 could ‘not be financially justified’
The station burns a range of coal from around the world – including Scottish open-cast coal – and typically requires approximately four million tonnes of coal per year.
Neil Clitheroe, Chief Executive of Energy Retail and Generation at ScottishPower, said: “We do not want to close Longannet, and I would stress that there are no plans to do so.
“We have invested over £200 million in recent years to improve both environmental and operational performance at Longannet, and we want to secure a longer term future for the station.
“However, to avoid closure within the coming years, changes to the plant’s financial situation must be achieved.
“The current market conditions, predominantly the transmission charging rules, mean that we simply can’t justify entering Longannet into a process which is four years away and will then only offer 12 months of certainty.
“For many years we have argued that the transmission charging penalties imposed on Longannet are disproportionately high in comparison with other power stations in southern England – some of which are actually paid a fee to remain connected.
“The lack of any sensible regional flexibility in the current system penalises generators in Scotland, and discourages investment in new thermal power plants. Simply to reach the 2018 delivery year, Longannet needs to pay over £120 million in transmission penalties.
“In comparison, if Longannet was located in the London area, the station would receive a fee of £4 million per year to stay connected.
“We of course recognise the changing role of coal in our energy mix, but given that Britain’s generating reserve margin could fall to as little as 2% in 2015, it is important that the transition to low carbon generation is managed correctly and changing regulation doesn’t force major generating plant to close prematurely.
“Our aim now is to fully explore all of the options to keep Longannet operational for as long as possible, and we plan to have detailed discussions with National Grid, The Scottish Government and DECC in the coming months.”
Scottish Energy Minister Fergus Ewing said today: “UK energy policy and regulation has endangered security of supply, has damaged investment in renewable energy, and now threatens Longannet.
“During Scotland’s Independence Referendum campaign, the UK Government made much of the so-called benefits of the UK for energy policy, but the reality on the ground is now plain for all to see.
“The UK Government has completely failed to manage the electricity system properly and unfortunately the consequences are now being felt. With a looming security-of-supply crisis, maintaining a charging regime that penalises Scotland’s energy generators simply makes no sense.
“Scotland’s largest power station, Longannet, has the potential to generate affordable, reliable power for years to come and yet it is being priced out of the market. We need an urgent rethink on policy for baseload capacity and reform of the UK transmission charging system, and I will be writing to UK Energy Secretary Ed Davey to seek an urgent meeting to discuss the future of Longannet and wider energy security.”
“As well as electricity supply and grid stability I am also concerned about the jobs involved. Longannet employs around 260 full time staff as well as benefitting the wider economy via suppliers to the plant.
“For the sake of both the workforce and the security of our energy system we need urgent reform of the much discredited transmission charging regime and better policy to maintain the reliable capacity that Longannet provides.”
* Meanwhile, Scottish Power has prequalified its existing gas and hydro plant in the Capacity Mechanism, as well a new proposed gas-fired power station at Damhead Creek in Kent. In total the company has entered over 3,500 megawatts (MW) of generation capacity.