UPDATE 2-UK renewables support list omits Eggborough coal plant

Thu Dec 19, 2013 7:35am EST

Related Topics

* UK govt lists 10 clean energy projects for fast-track support

* Eggborough coal plant biomass project not included

* Govt proposes auctions for mature renewable energy technologies

By Nina Chestney

LONDON, Dec 19 (Reuters) - Britain's Eggborough Power Station faced an uncertain future on Thursday after a decision by the British government not to make its biomass conversion project eligible for fast-track support.

To boost investment in clean energy technology, the government is reforming its electricity market and will replace a renewables support mechanism called the Renewables Obligation with a new scheme called "contracts-for-difference" (CfDs).

To avoid any pause in low-carbon energy generation while the transition is taking place from 2014 to 2017, the government has ranked 10 renewables projects to get early CfDs in late 2014.

The 10 projects include biomass conversion at two units of the Drax coal-fired power station; biomass conversion at Lynemouth Power Station; Dong Energy's Burbo Bank offshore wind farm, Hornsea offshore wind farm and an extension to its Walney offshore wind farm.

The full list is available at:

The Eggborough 2,000 megawatt (MW) coal-fired power station in North Yorkshire, which provides 4 percent of Britain's electricity, was due to start work on the biomass project on Jan. 6.

The lack of government support means the plant will no longer supply electricity after 2015, Eggbourough Power Ltd said in a statement on Thursday.

The lack of funding means the plant's number two generating unit will no longer be operational from September 2014, removing 500 MW, or 1 percent of capacity, from Britain's electricity grid, the company said.

"Unless a viable solution is found with government, the most likely outcome now is that Eggborough will no longer be supplying electricity to the grid beyond 2015," said Eggborough Power Ltd.'s chief executive Neil O'Hara.

EU rules to limit carbon emissions and an additional British tax on emissions make burning coal increasingly uneconomic. To survive, many coal plants are considering converting to biomass.

RENEWABLES AUCTIONS

The government also proposed on Thursday to establish an auction system for more mature renewable energy technologies alongside the introduction of the CfD mechanism.

The auction system would increase competition among more established renewable energy technologies and help Britain meet new guidelines for green energy subsidies laid out by the European Commission last month, the government said.

It will decide early next year whether to implement the auction system or not.

Owners of power plants that are able to switch on at short notice, such as gas-fired power plants, will be able to participate in a separate capacity market auction for the first time in December next year, the government also said.

The capacity market will reward standby power plants for providing electricity at short notice when renewable energy productions falls short of demand.

The December 2014 capacity auction will pay winners for providing standby power between Oct 1, 2018 and Sept. 30, 2019.

The mechanism is subject to state aid clearance from the European Commission.

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