UK coal-fired power output on track for record low
London, 21 April (Argus) — The UK's coal-fired power generation has fallen to zero during several off-peak periods over the past week, leaving average output this month on track for a new record low.
Clean dark spreads suggest that coal plants will struggle to compete with gas during even the peak hours of next month.
Coal-fired power output has fallen to zero on six occasions since 14 April, during which the grid did not require any supply contribution from coal plants to meet system demand.
The longest of these came yesterday, when coal plants did not generate any power from around 23:30 BST (22:30 GMT) on 19 April until 19:00 BST (18:00 GMT) yesterday evening. And even when coal plants did ramp up their production yesterday, output peaked at only around 275MW.
Coal-fired power generation has averaged only around 610MW so far this month, putting it on track for a record low. The current low is the 645MW average recorded during August last year.
Falls in both power and natural gas markets in recent weeks have left spark spreads little changed from where they were one month ago. But with the power market's losses having come against gains in European coal swaps values, dark spreads have come under further pressure, leaving coal plant owners with little incentive to run their facilities during off-peak hours.
At yesterday's day-ahead prices for delivery today, base-load clean dark spreads for any coal plant of 38pc-efficiency or lower were left in negative territory. And even peak-load spreads for plants of 37pc-efficiency or lower were calculated as being below £0/MWh.
The outlook for coal-fired power generation next month is also bleak. At current market prices for May, a gas plant would only need an efficiency of around 45pc to be more profitable to operate than any of the country's coal plants during even the peak hours of the day.
Summer peak-load power prices have come under pressure in recent years following the UK's sharp growth in solar power capacity, which has significantly increased supply during the daylight hours of the day and narrowed base-peak load spreads.
With solar power capacity largely feeding its generation into local distribution networks, the share of peak hour demand that the wider transmission system has to meet is reduced and the UK demand curve has flattened as a result, limiting thermal plant revenues.
UK power system demand is particularly limited at this time of year anyway, when temperatures are typically neither low enough for significant heating demand, nor high enough for the cooling demand season to begin. And the Easter holidays have kept industrial demand levels limited over the past week.
Last year, system demand peaked at around 37.2GW during May. Assuming an average supply contribution of around 7GW from nuclear plants, the UK has enough thermal generation capacity to meet demand next month without any coal-fired power generation.
Transmission system operator National Grid said in its summer outlook report earlier this month that it expected that some coal plant owners may opt to temporarily mothball their plants this summer until the winter when profit margins will rise.
UK May spark and dark spreads £/MWh
UK power generation mix MW
UK May power generation stack GW (LH), £/MWh (RH)