Scottish Power blames £40m UK-grid connection charge for decision to close coal-fired Longannet power station

longannet_720x400Scottish Power has confirmed that it will close its iconic Longannet coal-fired power station within a year after refusing to pay up to £40 million a year in grid connection charges in a UK government policy which fiscally favours power stations in SEUK (South East UK)

More than 250 direct-employed workers will be made redundant and up to 1,000 more jobs in west Fife could also be a risk after the company failed to agree a generation and supply deal with National Grid.

Scottish Energy Minister Fergus Ewing is expected to make a full statement to Holyrood MPs in the Scottish Parliament tomorrow. Yesterday, he held crisis talks with both Scottish Power and Fife Council.

Scottish Power’s loss at Longannet is, however, an economic gain for rival Scottish generator, Perth –based SSE which gained a £15 million National Grid’s tender for ‘transmission constraint management services’ for Scotland in 2016/17.

This means, in effect, SSE will be paid to switch on its gas-fired  Peterhead power station to meet peak-demand for UK electricity on an ad-hoc, responsive-basis.

The closure of the coal-fired giant 2400 MW station could mean  that Scotland will in future have to rely on importing electricity from rUK.

Scottish Power’s bid for this contract was rejected by National Grid and as a result the company has said that in all likelihood it will be forced to close Longannet by March 2016.

Consequently, the formal death sentence on Longannet was formally announced by Neil Clitheroe, Chief Executive, Scottish Power (Retail and Generation), who said:

 “We are extremely disappointed with National Grid’s decision as Scottish Power submitted a competitive bid that reflected our commitment to protecting the immediate future of Longannet Power Station.

“As we have said previously, the decision by National Grid means that, in all likelihood, we will be forced to announce the closure of Longannet by March 2016.

“Everyone will appreciate that it is a concerning time for all our people and we will do everything in our power to manage the outcome of this process as best we can.

“The issue regarding punitive Transmission Charges has not changed, and this still negatively impacts the future of the station.

“Beyond that, the current Transmission Charging regime is a major barrier to any future investment in flexible thermal power generation in Scotland.

“In any future scenario for Scotland, it is vital that the network here is supported by flexible generation to compliment renewables.”

Ewing said: “My first and foremost thoughts are with the hundreds of direct employees at Longannet power station, and the many more who are dependent on the plant.

“Whilst I of course welcome the news that Peterhead power station has secured a contract from National Grid, given its huge strategic importance to Scotland, the news that Longannet is now likely to close prematurely is very concerning for the Scottish Government.

 “Of course there has been broad consensus that the electricity system in Scotland will be less resilient if Longannet closes prematurely.

“It is vital therefore that these discussions also explore all possible options for averting the premature closure of the site, such as possible action to address discriminatory transmission charges, whether additional National Grid contracts could be available and whether the restoration coal proposal – mentioned in the UK Budget – could help the station’s economics.”

“We will look to engage all relevant authorities and agencies alongside Scottish Power to secure the best possible outcomes for those affected throughout the local economy and further afield. This activity will require cross-party support and close working between all of the relevant authorities.”

Hector Grant, Chief Executive of the Industrial and Power Association, said last night: “The earlier than anticipated closure of Longannet has not taken the industry by surprise.

“Only last Thursday at our Power Scotland Conference this was the topic of considerable discussion both by presenters and delegates alike.

“The Industrial and Power Association would emphasise that although there may be sufficient capacity to meet demand in Scotland at the moment, it would be prudent to ensure that plans are in place for sufficient baseload to give flexible generation availability over the coming years as we begin to see both of Scotland’s nuclear stations coming to the end of their lives.

“Planning needs to start now as without this we may well become reliant on importing power through existing and new inter-connectors from the other home countries and further afield.”

Longannet would have been due to close by 2020 under EU, UK and Scot-Government regulations aimed at cutting greenhouse gas emissions – which went up in the latest annual figures announced by St. Andrew’s House last week.

The UK Dept for Energy (DECC) commented: “Next year’s possible closure of Longannet is unwelcome news for the workforce and the UK government will do everything possible to assist them.

“The Department for Energy and Climate Change takes security of supply very seriously and has worked with National Grid to put in place an effective plan to secure electricity supply.

“National Grid have confirmed they continually assess the risks to security of supply across GB and have the tools to address any issues, including major plant closures, that emerge both nationally and in Scotland.”

“So the contract it awarded to SEE is good news for Peterhead, a plant that is developing carbon capture and storage technology which will help towards our carbon emission objectives. This will also help maintain high levels of electricity security for Scotland.”

Holyrood MP Murdo Fraser, Chairman of the Scottish Parliament’s Energy Committee, said: “We have known for some time that Longannet was going to have to close, but it’s disappointing this has been brought forward.

“It illustrates once again why the Scottish government has to change tack on energy policy.”

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