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E.ON Shuts UK Kingsnorth Power Station, Warns of Generating Gap

Published Monday, 17th December 2012 11:57 pm - © 2012 Dow Jones

By Ben Winkley

LONDON--German utility E.ON SE (EOAN.XE) Monday ceased commercial electricity generation from its 1,940-megawatt Kingsnorth coal-fired power plant in southeast England, and warned of the need for the government to provide policy clarity to avoid a potential energy gap.

The closure of Kingsnorth is likely to be one of many for big coal plants over the next few years as a result of European Union environmental legislation. These closures, together with those of several of the U.K.'s ageing nuclear power plants, will remove around one quarter of the U.K.'s generating capacity by 2015.

The industry regulator, Ofgem, earlier this year warned of potential power shortages as early as 2015 citing "tough environmental targets and the closure of ageing power stations."

Tony Cocker, Chief Executive of E.ON UK, said the end of commercial operations at Kingsnorth "not only marks the end of an important chapter but highlights the very real and present need for the government to deliver a framework that will provide a sustainable future for existing power stations and the new age of investment this country needs."

The government last month fleshed out its proposals for reforming the country's energy market, including plans to prevent delays to investments during the transition, and to assign more powers to the energy market regulator and the power grid operator.

The government hopes the legislation will provide incentives for investors to unlock the 110 billion pounds ($176 billion) it says is necessary to build the new infrastructure needed to keep the lights on, while ensuring security of supply and enabling it to hit its legally binding target of cutting total emissions by 80% from 1990 levels by 2050.

"Over the coming months more power stations will stop powering the U.K. and this provides a most striking example of the need for a clear, straightforward and customer-centric solution to be delivered by the Energy Bill," said E.ON UK's Mr. Cocker. "We need to get it right, and quickly, so we and other investors can build new plants with confidence.

The most recent figures from the Department of Energy and Climate Change showed that more coal was used to generate power in the U.K. in the second quarter of 2012 than in any comparable period for 14 years, as demand for natural gas imports were affected by high world prices.

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