Manchester gas plant gives up £450m subsidy

The owners of the 2GW Carlton gas-fired power plant in Manchester have given up a £450m subsidy, part of the UK’s capacity market scheme, as the facility is unlikely to be completed on time.

Carlton Power insist they will still go ahead with the project, capable of delivering electricity to 2 million homes but had to turn down the subsidy after failing to secure sufficient investment to build the gas power plant on time to produce electricity by the end of 2019.
Carlton Power
The Trafford gas-fired power station was the only new large-scale gas plant to get financing under the government's capacity market scheme, designed to secure the country's electricity supplies, but failing to meet the financial commitment milestone means they will not be taking it up.

"We did not have sufficient certainty that our Trafford combined-cycle gas turbine project (CCGT) would be completed in the time required," the company said in a statement.

The subsidy, secured in the 2014 capacity auction, was worth around £30m a year for 15 years and capability to commence producing electricity by end 2019 was part of the contract.

Britain began capacity auctions in 2014, looking to head off future power shortages as coal and older nuclear plants close and low power prices dissuade investors from building new ones. Despite the subsidies, investors are concerned about the uncertainty of revenues from new gas plants, Carlton Power said.
Trafford gas plant
Reuters reports that the company said it would discuss with the Department for Business, Energy and Industrial Strategy (BEIS) ways overseas firms could be encouraged to invest in new gas plants in Britain.

“Since securing the capacity market agreements in December 2014, we have invested significant resources to complete the development of Trafford with our chosen EPC Contractor GE and we had reached the stage that we would be ready to start Trafford’s construction in January 2017 which would deliver much needed low-cost electricity in early 2020,” a statement from Carlton Power added.

Claiming that the plant would have made a return of 16%, the company added that investors, “remain very concerned about the uncertainty of merchant revenues for new CCGT projects,” and said that despite government statements that new CCGTs were required, “it has become increasingly apparent that the current arrangements for supporting the development of new generation capacity do not give sufficient comfort for this to be brought forward without substantial and unacceptable risk to investors.”

Carlton said it would continue to pursue the Trafford plant and another at Thorpe Marsh, and said it would discuss with BEIS “ways in which much needed overseas investment can be encouraged to participate in this essential regeneration of reliable, low cost GGCT capacity.”



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