U.K.'s rapid wind power growth expected to squeeze natural gas-, coal-fired power plants' profits as they increasingly serve to fill intermittent renewables, say experts; government reforms that may reward operators for spare capacity start in 2014

LOS ANGELES , September 28, 2011 () – Natural gas- and coal-fired power plants in the U.K. are likely to see their profits squeezed over the next three years as their capacity is increasingly used as filler for intermittent renewable energy generation, say experts, reported Reuters on Sept. 27.

By late 2012, Britain’s wind power is forecast to increase 50% to 8,500 megawatts, which is about 13% of installed capacity, based on data from green energy group RenewableUK.

However, access to this power could be hindered by the U.K.’s old power grid, which can only accept a limited amount of new generation, Reuters reported.

Short-term power and gas prices are likely to be affected by wind power as it boosts electricity supply and gas plants face reduced and uncertain operating times, said Olly Spinks, director at Timera Energy, a consulting company.

Gas plants that are flexible will be crucial in assuring a secure energy supply going forward, but these power generators will need government help to remain in business if their profits sink, Spinks said, reported Reuters.

Currently being considered for approval by Britain’s parliament are proposals for reforming the energy market, starting around 2014. Under one measure, operators would be rewarded for maintaining spare capacity that could be used when needed.

At times of high wind power output, Britain’s short-term power prices spike, such as on Sept. 6, when wind from hurricane Irene hit the British Isles and set record high wind power production, Reuters reported.

High wind speeds can cause an oversupplied electricity market in the U.K., which is unlike Germany, where all renewable energy output has to be sold on the EEX exchange and can lead to negative power prices when the wind is strong and demand is low.

A power glut in Britain this month caused network operation National Grid to pay wind farm operators in Scotland to shut down their turbines to avert a possible block in the grid, reported Reuters.

To better distribute power, National Grid plans to spend £2.2 billion (US$3.44 billion) over the next decade to nearly double power export capacity between Scotland and southern England.

Britain's Renewable Obligations program requiring that power suppliers source an increasingly portion of their power from renewables adds further pressure to energy prices, especially from wind generators, Reuters reported.

The primary source of this article is Reuters, London, England, on Sept. 27, 2011.

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