Perth-based energy giant SSE said it is likely to close three of the four units at its coal-fired power station at Fiddler’s Ferry, Cheshire, from April 1 due to the age of the station and competition from cheaper, alternative forms of power.
“Although a final decision has not yet been taken, SSE’s expectation is that (subject to consultation) it is likely to close three of the four units from 1 April 2016 and it is informing the market accordingly,” the company said in a regulatory news service statement.
If SSE closes the units, it would be liable to pay a £33 million penalty for breaching a capacity delivery agreement.
“The end of commercial operations at Fiddler’s Ferry would be consistent with SSE’s long-standing objective to transition its generation assets from a portfolio weighted towards gas and coal towards a portfolio more weighted towards gas and renewable sources of energy,” said SSE.
“SSE plc has reviewed its options for the future operation of its power generating plant that followed the result of the Capacity Market Auction in December 2015.
“It has determined that it should consult with employees and other stakeholders in the coming weeks on the proposal to bring commercial operations to an end at its coal-fired power station at Fiddler’s Ferry, Cheshire.”
SSE said coal stations are being displaced by cheaper alternatives, “namely low carbon and gas-fired generation.”
“They are therefore generating less electricity, and receiving less income, than they have historically.
“The long-term market trend, which continues to point to gas prices enjoying a comparative advantage over coal prices and for increasing volumes of low carbon generation to come forward, is for this to continue.”
SSE said that as an aging asset built in the 1960s, Fiddler’s Ferry “requires significant levels of expenditure to maintain safe operations and adequate levels of reliability.”
“Whilst costs at the station have been reduced in recent years they are not currently covered by the income the station receives from generating electricity and providing services to National Grid.
“Fiddler’s Ferry has been loss-making over the last two financial years and cash outflow in respect of the station is expected to exceed cash inflow in all of the financial years through to March 2020.”
SSE employs 213 people at Fiddler’s Ferry and it said it will actively seek to avoid, but cannot rule out, some compulsory redundancies “if an ongoing role for the three units at the station cannot be identified.”
Paul Smith, managing director, generation, at SSE said: “We said in December that following the completion of the Capacity Market Auction we would consider the options for the future operation of our power generating plant, including Fiddler’s Ferry.
“This has, unfortunately, led us to conclude that commercial operations at Fiddler’s Ferry may have to come to an end, subject to the consultations that will now take place …
“The reality is … that the plant at the station is aging, its method of generating electricity is being rendered out of date and it has been, and is expected, to continue to be loss-making.
“The fact it makes more sense for SSE to contemplate making a substantial payment in lieu of the capacity agreement relating to Fiddler’s Ferry in 2018/19 demonstrates just how economically challenged Fiddler’s Ferry has become.”