A 53-year old coal-fired power plant in northern England is being considered for closure as the owners say carbon taxes have made the facility economically unviable.
The Eggborough power plant may close in March 2016 and around 240 jobs at risk.
"A continued fall in power prices driven by the decline in commodity prices, combined with continued high carbon tax, means that Eggborough is unable to cover its future operating costs," Eggborough Power Limited said in a statement.
Eggborough Power Limited is owned by Czech energy company EPH, which completed its purchase of the business in January.
Reuters reports that British wholesale power prices have fallen around 9 per cent since the beginning of the year, while costs soared after Britain's carbon tax doubled this April.
Coal plants emit almost double the amount of CO2 per megawatt produced as gas plants, so they have been hit hard by the tax.
Eggbrorough Power said it would need additional funding of around £200m over the next three years to keep the plant running.
The 2 GW plant has the potential to provide power to around 4 per cent of Britain's homes, but while the government said the news was "disappointing" it asserted that security of electricity supply was unaffected by the potential plant closure.
In response to the news energy union Propect said Britain will face an energy shortage due to the lack of incentives to invest in non-renewable power.
On behalf of 24,000 scientists, engineers, managers and other professionals in the energy sector Prospect negotiator Michael Macdonald said: “Due to far higher carbon taxes than the rest of the European Union, and the lack of a planned transition to low-carbon technology, investment in large power plants has been constrained for the past decade.
“Faced with a higher tax bill of £320m over the next three years, and no certainty about the future, there is no financial incentive for Eggborough to invest in clean coal technology to keep the lights on.”
Macdonald said capacity could be maintained this winter through a combination of industrial customers disconnecting form the grid and the use of inefficient diesel generation to plug the gap caused by the closure of Britain’s coal-fired power stations.
“But in the longer term the loss of coal-fired generation removes the skills and infrastructure required to make a success of carbon capture and storage that offers secure energy at low prices,” he warned.
Prospect is calling for an urgent review of carbon taxes and future capacity payments to create an incentive to invest in clean coal technology.