* New gas plant needs raised by 30 pct to 26 GW
* No shale gas fracking decision on Wednesday
(Adds minister comment on capacity needed)
By Karolin Schaps
LONDON, Dec 4 Britain will on Wednesday increase
its estimate for new gas-fired power plant capacity to 26
gigawatts by 2030, up 30 percent on estimates given only two
months ago as it lays out the case for new investment in the
"We need up to 26 gigawatts of new gas capacity but much of
this will be used to replace existing capacity," said an energy
ministry spokesman ahead of an announcement expected by finance
minister George Osborne on Wednesday.
New gas-fired power plants are needed to back up
intermittent renewable energy and replace ageing and polluting
Around 21 GW of new plants needed will be used to replace
stations that will shut down between now and 2030, Energy
Minister John Hayes said in a parliamentary committee meeting on
The government had previously counted on 20 GW of new plants
coming on line by 2030, but on Wednesday increased this amount
to 26 GW.
"(Osborne) is looking at the generation in the future and
what might be possible scenarios around that," said the
spokesman for the energy ministry, which prepared the report on
the future of gas-fired power plants.
The report aims to give power plant investors enough
incentives to build new gas-fired stations, needed to fill a
looming mid-decade supply gap created by the closure mainly of
Britain's energy regulator warned in October the country's
excess power capacity margin could fall to 4 percent by 2015/16
from 14 percent now due to plant closures.
"The government's confirmation that gas will continue to
play a fundamentally important role in the UK's energy mix
should give investors much-needed certainty to invest," said
Mike Tholen, economics director at industry lobby Oil & Gas UK.
The government last week proposed new legislation including
a mechanism to reward owners of gas-fired power plants for
holding stand-by capacity to complement the use of intermittent
renewable energy plants.
Britain needs to attract around 110 billion pounds ($177
billion) in electricity market investments by 2020 to replace
Around 30 projects have been given planning permissions but
developers have held back on a final investment decision mainly
due to policy uncertainty.
"Any move to expand the role of gas in the UK's power
generation sector would need to be accompanied by a reversal of
(the) decline in production if greater import reliance is to be
avoided," said Peter Kiernan, energy analyst at The Economist
A possible counterweight to the decline in Britain's gas
production is the exploration of shale gas, which has
revolutionised the U.S. energy market.
Britain last year put a temporary ban on shale gas fracking
work at a site near Blackpool where a number of earth tremors
The government is expected to make a decision soon on
whether to lift the ban, but the Chancellor's announcement on
Wednesday will not touch on the resumption of fracking work, the
energy ministry spokesman said.
"From the gas generation strategy don't expected any
announcement on shale gas per se," he said, adding that the
government's shale gas report would be published soon.
Osborne announced in October a consultation on offering tax
breaks to shale gas exploration, such as removing a
supplementary charge on corporation tax that applied to North
Sea oil and gas drilling.
Industry sources said they did not expect further details
about shale gas tax breaks on Wednesday.
($1 = 0.6213 British pounds)
(Reporting by Karolin Schaps; additional reporting by Oleg
Vukmanovic and Sarah Young; editing by Keiron Henderson)