PLANS TO BUILD a new generation of gas power plants in the UK could derail the country’s climate targets, push up household bills and waste up to £9 billion of investment, warns a new report from the financial think tank Carbon Tracker.

It reveals that a combination of clean energy technologies can already offer the same level of grid services as gas, at lower cost. By 2030 it will be 63 per cent more expensive to build new gas power than to set up a Clean Energy Portfolio (CEP). The report raises questions about the UK’s commitment to becoming a world leader in green energy as it prepares to host the UN climate summit.

The government is committed to phasing out the UK’s last 6GW of coal power by 2025, by which date almost half the country’s 9GW nuclear fleet is due to be decommissioned. Developers plan to fill this gap with 14GW of new gas power, but the report finds they could be left with £9 billion of stranded assets which may not generate an economic return, leading to impairment.

Foot Off The Gas – Why the UK should invest in clean energy calculates that a CEP will deliver the same grid services as a new Combined Cycle Gas Turbine (CCGT) plant at lower cost, providing the same monthly energy, meeting the top 50 hours of peak net load, and offering the same level of grid flexibility. In some months the CEP would generate more energy.

It warns that if the UK pursues gas, rather than the low cost clean energy solution, it risks pushing up prices for consumers. This route will also make it harder to meet the UK’s legal target of achieving net zero emissions by 2050 because the new gas plants would also produce 24 million tonnes of CO2 a year – equivalent to seven per cent of total UK emissions in 2019.

The report calls on the government to level the playing field for clean technologies by reforming the capacity market, which “disproportionately incentivises and rewards new and existing gas power”.

Power economics reached a tipping point in 2020, when the cost of clean technologies fell to the point where a CEP could produce electricity in the UK at the same cost as a new CCGT, £60/MWh. However, costs of clean technologies – particularly battery storage – are forecast to continue to fall, while gas plants are exposed to rising carbon and volatile gas prices, as has been seen recently with sharp price rises. By 2030, CCGT gas power at £67/MWh will be 63 per cent more expensive than a new CEP on a Levelised Cost of Energy (LCOE) basis. A CEP is expected to produce electricity at a cost of £41/MWh.

The CEP uses onshore wind and utility-scale solar to generate power, backed up by battery storage and demand response which provide flexibility and capacity when renewable generation is not available. Investment in energy efficiency also plays a role.The report says the UK government views gas as the only reliable, secure source of energy. It designed and introduced the capacity market to ensure security of future power supply. Auctions have disproportionately favoured gas, awarding more than 40 per cent of capacity to CCGTs with just two per cent to demand response and 0.5 per cent to battery storage.

However, by favouring gas, the capacity market now threatens consumers with higher prices and conflicts with the UK’s goal to decarbonise the power sector. The Committee on Climate Change recommended all unabated gas plants should be phased out by 2035 to meet the UK’s net zero emissions target.

Not only can CEPs provide the same grid services at lower cost, but they also offer greater security of supply: 54 per cent of UK gas was imported in 2019, exposing the country to import risk and users to volatile energy prices.

The Government has announced plans to make the UK a world leader in green energy, supporting 60,000 jobs, and accelerating progress towards its 2050 net zero target. The report calls on it to level the playing field so all clean technologies can compete fairly against gas in capacity market auctions, especially demand side and storage technologies.

* The report is available to download here.

* Source: Carbon Tracker