Lack of investor confidence limits number of UK gas power stations

Suzie Neuwirth
A LACK of private sector funding has limited the number of independent gas-fired power plants being built in the last five years, claims a new government-backed report.

There is currently enough investor appetite to fund two large gas plants a year, but a return to market confidence could enable ten plants a year to be commissioned, according to the research by consultancy Parsons Brinckerhoff into gas and coal power plant technology in the UK.

In 2008-9, virtually no gas turbine power plants received private funding. More recently the markets have eased but there have been many delays in plants proceeding due to funding issues.

“These delays relate more to commercial issues and the limited confidence of lenders in forecast plant viability,” said the report, commissioned by the Department of Energy and Climate Change.

The UK will be increasingly dependent on gas in the next few years to ensure security of supply, as older coal-fired plants go offline.

But in the UK and the rest of Europe, conventional power plants are struggling to make a profit in the face of weak wholesale prices and increased competition from renewable energy sources.

FTSE 100-listed Centrica said in May that it is putting three of its UK gas-fired power stations up for sale, worth £500m, “to address the continuing operating losses”.

A lack of skilled labour is another obstacle to constructing new gas-fired power plants, said the report. “While under EU legislation it is relatively simple to import European skilled labour to meet the demand, this has not proven straightforward where tensions with local resources has led to poor industrial relations severely delaying construction at several sites where it has been attempted in recent years,” it said.