Thursday 29 February 2024

UK power plants secure historic prices amid supply fears

UK power plants are poised to demand unprecedented prices in the coming years to sustain the nation's energy needs, as concerns mount over a potential shortfall in electricity supply.

Recent reports indicate that power stations have secured a record-high price of £65 per kilowatt per year for the 2027-28 period in a capacity market auction, surpassing previous projections.

Sam Hollister, Head of Energy Economics and Finance, LCP Delta, said: "The undersubscription in the auction was always expected to lead to very high prices, and as predicted, we are now looking at a cost of £2.7 billion for 2027/28, followed by an additional £1.7 billion spread annually over 14 years, a cost consumers will certainly bear the brunt of in due course.

"For the first time in the history of the T-4 auctions, less capacity entered the auction than the overall target. This is due to the dramatic drop in the volume of new-build capacity entering the auction as unabated gas stations face uncertainty and low carbon flexible capacity is yet to come forward in significant volumes.

"In this volatile market, if these concerns are not addressed, this may be the sign of things to come with high clearing prices and little new generation coming forward."