It the Capacity Market does not deliver large CCGT this year international investors could walk away, Intergen’s Mark Somerset warned New Power. In a wide ranging interview the independent generator’s vice president of development for the EMEA region said, “People look at it and get extremely frustrated. … It has to happen either this next one or at the very latest the following year.”
Somerset is also afraid that if the CM does not deliver large new plant soon the government will get cold feet about its plans to close old coal plant. “I do have a fear that if CCGTs don’t click in the next two auctions then as the mid 20s approaches the government will say we have to keep old coal going. It will just perpetuate this support to old coal,” he said.
The company won a Capacity Market contract for a 300MW OCGT in the most recent CM auction and Somerset said, “We have just got a 300MW OCGT away and we are building. Other people can’t say the same. So we are happy with that.” But he said he was frustrated by slow progress on the government’s stated energy strategy. He said, “The gas generation strategy first emerged in 2011 and Amber Rudd referred to it in 2015. If you are going to come out with that stuff then hold your nerve and do it.” The decision to change the trajectory of the Carbon Floor Price was another frustration.
Overall, he described the UK as a good place to invest, but said, “because it is a bit cutting edge in terms of trying out different things, then investors have to have patience and nerves of steel to see it through. Next year if we take the decision to be in the Capacity Market then that will be the fourth time we have exercised our shareholders, the fourth time we have exercised the Siemens and GEs of this world [as equipment suppliers] and there are only so many times that you can do that.”
Somerset says that Intergen is looking at storage, probably in the form of batteries, at all its sites. He explains that although some people were quite surprised at some of the low prices achieved in National Grid’s Enhanced Frequency Response (EFR) auction last year, “We understand how some of these low prices can be obtained. Clearly the technology is moving fast and it’s a very fast moving landscape. But if you have your own site and existing grid connection those are the two big issues you need to take into account in terms of capex.”
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