Coal will continue to be the preferred source of fuel for power generation in the UK as energy prices for next winter will be flat except for gas, according to a new report by the National Grid.
In its ‘Winter Consultation Report 2013/14’, the transmission network operator notes that power generation economics have strongly favoured coal for the past 12 months, and with gas prices rising over the same period, the spark spread has almost doubled to about £20/MWh.
National Grid expects peak gas demand to be 511 million cubic metres per day (mcm/d) the next winter, just 1% below its revised forecast for last winter.
According to the report, for gas to become the preferred source of fuel for power generation next UK winter, gas price needs to fall by about 50% and coal prices need to double, or there needs to be a tenfold increase in the carbon price to around €60/tonne.
"The spike in the gas price during March saw the spreads peak at just under £50/MWh," the report said.
Electricity demand remains below pre-recession levels, with generator availability decreasing to give a forecast de-rated surplus of 6%at UK winter peak, in line with Ofgem’s reference scenario in its recently published electricity capacity assessment.
The National Grid expects peak normal demand for this winter to be at 55.1GW, while available generation capacity at the start of winter is projected at 77.1GW.
The report found that excluding wind, capacity has fallen from 74.5GW at the start of last winter to 70.7GW at the start of this winter.
Last winter’s peak electricity demand was 56.4GW on 12 December 2012, while the highest gas demand was 393mcm/d on 16 January 2013.
Image: National Grid expects coal to continue be the favoured source of fuel for power generation for next winter in the UK. Photo: Courtesy of FreeDigitalPhotos.net.