Digital Zeitgeist – The Multibillionaire Investor Křetínský And The Trader Vitol Both Have Their Eyes on The British Power Plant Subsidies
An upcoming auction will set aside £1.5 billion in order to keep the lights on and put power generators on standby
Daniel Křetínský, a billionaire investor in West Ham United, and Vitol, a Swiss commodities company, are among the bidders who are expecting to secure hundreds of millions of pounds in subsidies to keep the lights on in Great Britain.
This month, the energy system operator for National Grid will be making the announcement of successful bidders in an auction for the “capacity market” for the year 2026.
The price of the subsidy that will be paid to owners of power plants and battery storage facilities at the yearly auction will be determined such that they can cover the costs of being on standby in the event that there is an immediate need for more electricity. The costs are compensated by the bills that are sent out to customers.
Contracts lasting one year are offered to plants that are already in operation, while those lasting 15 years are given to new facilities to ensure that investment expenses are covered.
An examination of the public register conducted before the auction revealed that 69 gas-fired power plants that were recently constructed were in the running for 15-year contracts.
Last year, gas was the single most important source of electricity, accounting for 38% of generation, which was the highest percentage within the last three years. The potential construction of additional power plants that run on fossil fuels might enrage environmental activists and others who are lobbying the government to move more quickly in its support of renewable energy initiatives.
The auction comes at a time when Ofgem, the energy regulator, is formulating measures to restrict backup generators from raking in “excessive” profits as a condition of their licenses to operate in the United Kingdom.
Profits in the energy business are coming under greater scrutiny because of rising prices for consumers. Shell infuriated investors after announcing huge earnings the previous week, while BP is anticipated to report underlying profits for the fourth quarter of about $5 billion on Tuesday.
Křetínský, who is known as the Czech Sphinx due to his aversion to publicity, has become prominent in Britain as a result of his investments in Royal Mail, West Ham United Football Club, and the supermarket company Sainsbury’s.
The tycoon’s energy holdings in the United Kingdom consist of the Langage and South Humber Bank gas plants as well as the Lynemouth biomass project, which is located in Northumberland.
EP UK Investments, which is owned by Křetínský, is competing for contracts that would ensure supplies from three new-build gas units located in Eggborough for a period of 15 years. The proponents of the North Yorkshire project believe that there is an “urgent need” to replace the amount of energy output lost at the site due to the retirement of coal and nuclear power stations.
In addition, EP UK is aiming to secure one-year contracts with Langage and South Humber Bank.
VPI is looking to obtain 15-year contracts so that it may construct two new gas-fired units at Damhead Creek in Kent. VPI is controlled by Vitol, which has reported increasing earnings during the energy crisis.
VPI is also competing for one-year contracts for plants located in Immingham in North Lincolnshire, Damhead Creek in Kent, Shoreham outside of Brighton, and Rye House in Hertfordshire.
After submitting the 20 highest winter bids for electricity on December 12th, Rye House came under examination and established new records when National Grid shelled out £27 million to keep the lights on during chilly, still conditions.
InterGen is also competing for one-year contracts for its locations in Spalding, Rocksavage, and Coryton. On December 12, the company got an estimated £12.6 million in funding for this purpose.
According to Aurora Energy Research, the proposed new-build units at Eggborough by EP UK may be worth more than 840 million pounds in subsidy payments over the course of 15 years, while the proposals that VPI has for Damhead Creek might bring in more than 750 million pounds.
Based on the prices from the previous year, it is anticipated that EP UK’s existing units will be worth more than £64 million per year, while Vitol’s trio of plants may account for more than £54 million. Furthermore, it is anticipated that the prices will increase during this month’s auction, in part because of inflation.
Other proposals include a project planned by Drax in South Wales and a set of projects suggested by Statera Energy in the south-east.
“Gas remains essential for security of supply today and keeping the lights on during a period of low wind and solar power,” said Marlon Dey, head of research for UK and Ireland at Aurora. “Gas remains essential for keeping the lights on.” In order to further lessen our reliance on gas and scale up the use of renewable energy sources, there is still a significant distance to travel.
“If gas-fired peaking plants are used sparingly, they will have an important role to play and are not necessarily incompatible with net zero – depending how much they are used.”
In the auction that will take place on February 21st, the government’s goal is to acquire 42GW to 45GW of capacity. The owners of existing plants intend to submit bids for 39 gigawatts worth of electricity, which means that new facilities must supply 3-6 gigawatts, which is sufficient to power 2.5 million to 5 million households.
At the auction held the year before, the price was set at £30.59 per kW hour, which will result in a cost of £2.1 billion over the next 15 years to acquire 42GW of electricity.
Separately, National Grid stated on Sunday that it had contacted Uniper, the owner of the coal-fired power plant located at Ratcliffe-on-Soar in Nottinghamshire to request that a unit at the facility be placed on standby in the event that it is required on Tuesday during a period of low wind.
online sources: theguardian.com, auroraer.com