Renewable electricity signals changing power market

19th July 2019

GlobalData

Alex Lynn

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E.ON’s move to supply its residential customers with 100% renewable electricity can potentially influence the Big Six to move towards renewable energy and signals a changing trend in the UK power market, according to GlobalData.

With the UK aiming to phase out all its coal-fired plants by 2025, the Big Six have been focusing more on gas-fired and renewable energy projects. According to GlobalData, the average project cost of a coal-fired plant at the end of 2018 in the UK was $2,811.1 per kW. Comparatively, a gas-fired plant had a project cost of $1,191.7 per kW, onshore wind with $1,999 per kW and solar photovoltaic (PV) with $1,559 per kW in 2018. Therefore, the focus is shifting away from the construction of coal-fired plants.

Mohit Prasad, Project Manager at GlobalData, commented: “The Big Six hold more than 70% of the domestic supply market and have already started re-aligning their generation fleet by making announcements on the planned closure of their coal-fired plants. For example, SSE will be closing its last remaining coal-fired plant by March 2020 and EDF Energy is planning to close its coal-fired plant by September 2019. Furthermore, companies including Scottish Power and SSE have been making investments in offshore wind in order to have more renewable energy in their portfolio.”

The UK witnessed a drop in green energy investments in 2017 due to changes in the government policies such as withdrawing subsidies from solar and taxing renewable energy. As a result, energy companies have been focusing on building gas-based projects. However, to promote renewable energy, the government has implemented Contracts for Difference (CfD) and recently introduced the Small Export Guarantee (SEG) scheme.

Prasad added: “The average project cost of renewable energy is declining due to the advancements in technology, reductions in the cost of producing components and the scale of production. According to GlobalData, the average project cost of solar PV installations declined sharply from $6,678/kW to US$1,560/kW between 2010 and 2018. During the same period, the cost of onshore wind declined from $2,200/kW to $1,999/kW.

“With the average cost of solar PV installations expected to decline further, the power generated through such systems will be cheaper, which will ultimately impact the electricity bills of households and commercial installations.”