UK conventional thermal and nuclear capacity in doubt

The life of the UK's existing nuclear capacity has been extended until September 2014 and preliminary approval has been given to a new site in Somerset. However, with the Kingsnorth coal-fired plant due to come offline in March 2013, and with nuclear capacity set to fluctuate due to additions and closures, the government must ensure its Electricity Market Reform guarantees replacement capacity.

The Office for Nuclear Regulation has approved an extension to the operating life of the Wylfa nuclear station in Anglesey, North Wales, which has already passed its planned shutdown date of December 2010. Although the site's second reactor has been dormant since April 2012 due to limited stocks of Magnox fuel, the nuclear decommissioning authority announced on August 9 that, following reviews, the site has been granted permission to continue to transfer partially used fuel from reactor 2 to reactor 1, although only until around September 2014. This reprieve means that Wylfa will become the oldest Magnox reactor still generating in the UK (the previous longest serving Magnox station, Oldbury, was closed in February 2012 after running for 44 years).

Also on the generation chopping block is the Kingsnorth coal-fired plant in Kent. The four-unit station - owned by E.ON - has a capacity of 1.94GW. Under the EU's Large Combustion Plant Directive, the plant can only operate for a total of 20,000 hours, of which less than 2,000 operational hours remain. As a consequence, it is expected to close by March 2013, removing a significant amount of capacity from the grid.

On the positive side for nuclear generation, however, is the news that preliminary approval has been given to EDF's proposed new nuclear station, Hinkley Point C, in Somerset. Indeed, on August 13 the Environmental Agency gave initial approval for the Bristol Channel to be used to discharge radioactive water.

If all permits and consultations work in its favor, the Hinkley Point C station will be built by NNB Generation Company Limited, a joint venture between EDF, Areva, and Centrica. The next step in the process will take place after November 9, 2012, when public consultation on the discharge permits ends. Licensing approval for the European pressurized reactor technology that will be used for Hinkley Point must also be obtained before construction can commence. A review by the Office for Nuclear Regulation could be completed by the end of 2012 provided that outstanding questions in the Generic Design Assessment process are satisfied.

The uncertainty created by these possible additions and closures over the next two years means that the government is under extra pressure to ensure that investment in replacement capacity comes forward. This is a key objective of its Electricity Market Reform (EMR), whose measures include a Contracts for Differences payment to low-carbon generators. The EMR is currently being refined by the Department of Energy and Climate Change following pre-legislative scrutiny.  

Written by Yasmin Valji

Analyst in the Datamonitor Energy & Utilities team