The developer behind the proposed 1.9GW new gas plant at Trafford has given up its capacity market contract as it struggles to secure backers.
Carlton Power told government it was unable to meet a deadline extension for the financial commitment milestone (one of the rules in the capacity market) and was not certain of its ability to deliver its contracted power.
The contract is worth around £30m a year. Carlton Power had been given a three month extension on its original September deadline by then energy secretary, Amber Rudd, last July.
That deadline passed yesterday (19 December) and the company today issued the following statement:
“This decision has been taken with regret but we understand that the Government needs to have a clear picture of what generation capacity is going to be physically available in the future and we did not have sufficient certainty that our Trafford combined-cycle gas turbine project (1.93GW CCGT) would be completed in the time required.
“Since securing the Capacity Market agreements in December 2014, we have invested significant resources to complete the development of Trafford with our chosen EPC Contractor GE and we had reached the stage that we would be ready to start Trafford’s construction in January 2017 which would deliver much needed low-cost electricity in early 2020.
“The economics of the Trafford project are expected to provide returns of close to 16% and we have had detailed discussions with a wide range of UK and international investors over the past two years to seek the required capital funding. Investors have consistently commended the Trafford project in terms of construction readiness and technical capability; however it is clear that they remain very concerned about the uncertainty of merchant revenues for new CCGT projects.
“It has been acknowledged by the Government and others that new high-efficiency CCGT plant are essential for the UK market in order to achieve the aims of security of energy supply and low cost of energy with the smallest possible environmental impact. However it has become increasingly apparent that the current arrangements for supporting the development of new generation capacity do not give sufficient comfort for this to be brought forward without substantial and unacceptable risk to investors.
“Despite this decision, we will continue to pursue our development of Trafford and our power project at Thorpe Marsh (near Doncaster) and we look forward to discussing with BEIS ways in which much needed overseas investment can be encouraged to participate in this essential regeneration of reliable, low cost GGCT capacity.”