UK’s SSE all set to earn a windfall to keep Britain’s lights on next winter

Bloomberg

SSE Plc is set to earn a windfall from the gas-fired power plants it will ensure are available to help keep UK lights on next winter.
The utility could make as much as 172 million pounds ($233 million) in an auction that cleared at 75-70 pounds a kilowatt per year, according to calculations using National Grid Plc data. SSE stands to be by far the biggest winner among the companies competing.
The capacity market — a mechanism designed to guarantee there’s enough energy available for the country — is paid for by consumers. In a sign of caution about security of supply, the government last month decided to increase the target capacity it wants to have available next winter. The capacity target for next winter was raised after it became clear that some stations with a four-year contract were now unable to fulfill their obligations. SSE put forward gas units for the auction.
SSE controls 42% of the capacity bidding, it has a “very strong hand” in setting the price, BloombergNEF analyst Andreas Gandolfo said.
Britain is dealing with a confluence of energy-related issues, including aging power stations, soaring natural-gas prices and utilities that have gone bust. Consumers are facing ever-higher prices, with domestic energy bills set to jump 54% from April, putting more pressure on household budgets being stretched by rising inflation.
Power plants largely aren’t being replaced, partly due to a government push into renewables, particularly offshore wind. Capacity auction prices also haven’t been high enough to make it worthwhile building new stations. The stakes are high — when it’s not windy, the UK relies heavily on gas, the price of which has quadrupled in the past year.
SSE entered its brand new Keadby-2 gas-fired plant into the auction. The station is still in its testing period and will need to be commercial by October 1 when the capacity contract starts.