U.K. plans gas curbs after energy review

The U.K. government has drawn preliminary conclusions after a review of energy sources for power generation and plans to crack down on gas-fired schemes.

The Department of Trade & Industry (DTI) said that interested parties have until July 20 to submit their views on proposed reforms, aimed at ensuring diversity and security of fuel supply for power plants.

Review background

When the government first announced its review in November 1997, it followed up with a moratorium on gas-fired power schemes. This was later watered down, because the government was accused of favoring the coal industry (OGJ, Jan. 12, 1998, p. 28).

The preliminary results of the review will do nothing to stop complaints about coal industry favoritism, while a stricter policy on gas-fired power stations is envisioned.

Nevertheless, almost immediately after the consultation document was published, the government reportedly approved a plan to build an 800-MW gas-fired plant near London.

Distortions claimed

Margaret Beckett, president of the Board of Trade (head of the DTI), said the review confirmed that there are serious distortions in the U.K. electricity market, with prices to consumers higher than they should be.

"Action is needed," said Beckett, "to reform electricity trading arrangements so that all plants play a full role in competition and to address the market power of the generators.

"There is no question of guaranteeing market share for any fuel, but it is of primary importance to avoid the preemptive destruction of our scope for diversity and security while reforms are yet to feed through.

"Therefore, we propose to apply a stricter policy on power station consents while our reform agenda is addressed. We would expect to relax the consents policy when reforms have been undertaken and distortions removed."

Among problems highlighted by the review DTI listed substantial introduction of gas-fired power generation into the market without anticipated falls in electricity prices.

DTI claims there are distortions in the way power is distributed that favor gas-fired plants, which are inflexible in operation compared with coal-fired plants. Also, DTI warns that gas could fuel 75% of U.K. power generation by 2020, raising concerns over diversity and security of supply.

Favoritism disputed

"There is no deal between government and the generators to get them to buy British coal," said Beckett. "British coal can have a very positive future in electricity generation, if it can be competitive.

"Our proposals will encourage environmentally friendly forms of generation such as combined heat and power, and take full account of our climate change and environmental objectives."

DTI said the proposed stricter consents policy would include a presumption that new gas-fired power stations will "normally be inconsistent with the government's diversity and security of supply concerns, but combined heat and power projects have environmental and other benefits which may outweigh these concerns."

The department added that the government's environmental objectives would not be compromised by renewable energy schemes or by clean coal projects where flue gas desulfurization equipment is fitted.

New plant

Meanwhile, New Orleans-based generator Entergy Corp., owner of U.K. electric utility London Electricity, confirmed approval to build a new power plant at Damhead Creek in the Thames River estuary.

DTI is expected to give the all-clear to several more gas-fired projects. Also, Dutch generator Petroplus International is reportedly negotiating with Chevron U.K. Ltd. to use a 20-MW power plant at the mothballed Pembroke refinery to provide power to the electricity grid.

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