UK to keep carbon limit high enough for gas plants

Fri Mar 16, 2012 8:01pm EDT

* Government guarantees 450 g/kWh carbon limit until 2045

* Electricity reform to pass through Parliament in May

* Gas plants to play vital role in providing backup capacity

By Karolin Schaps

LONDON, March 17 (Reuters) - Britain's energy minister promised on Saturday to keep the limit on power plants' carbon emissions high enough until 2045 to ensure that modern gas-fired stations can continue to operate.

The government will submit its full proposals to reform Britain's electricity market to Parliament in May, marking the first step to enshrine the deepest overhaul of the market in 30 years into law.

The previous draft had proposed that the limit on carbon emissions allowed per plant would be reviewed over time. Developers of gas-fired plants were concerned their power stations could be scrapped if the limit was reduced below a level they could meet.

UK Energy and Climate Change Secretary Edward Davey guaranteed that a proposed level of 450g of carbon per kilowatt-hour (g/kWh) of electricity would be maintained until 2045.

State-of-the-art gas plants emit less than 400 g/kWh, while coal-fired plants without carbon-capture technology emit nearly 800 g/kWh.

"This announcement by government removes a potential uncertainty for gas-fired generation, providing clarity around investment and lending decisions," said Mark Somerset, vice president of InterGen Europe, which plans to build two new gas-fired power plants in Britain.

Its new 800 megawatt combined-cycle gas turbine (CCGT) projects at Spalding in Lincolnshire and on the Thames Gateway in Essex are also planned to be carbon-capture ready, meaning they can be retrofitted with the technology in future.

"Gas will continue to play a vital role in a low-carbon economy. Modern gas-fired power stations are relatively quick to build and twice as clean as many of the coal plants they're replacing," Davey said in a statement.

The reform proposals also foresee an important role for gas plants in providing backup capacity alongside intermittent renewable energy production under a so-called capacity mechanism.

"A fifth of the UK's ageing fleet of power stations will close this decade, and it's not possible to fill that gap entirely with low-carbon alternatives in that timescale," Davey said.

Gas plant operators will be able to take part in competitive auctions to provide backup capacity for a certain year and receive payments for making power plants available when needed.

The minister will also publish a strategy for Britain's gas market this autumn, detailing whether the government needs to intervene in the market to guarantee security of supply and investments in new gas-fired power plants.

The proposals will be based on gas and electricity market reports expected to be published by energy regulator Ofgem by September. (editing by Jane Baird)

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