Gas to lead power mix as coal is phased out

 

The role of gas in the UK’s future power mix is set to rise to more than 50 per cent in under 10 years, according to BMI Research of ratings agency Fitch Group.

In its industry trend analysis this week on the outlook for the sector, BMI said gas-fired generation would account for 52 per cent of power by 2027, up from last year’s figure of 45 per cent. The prediction is based on delays to new nuclear capacity, the closure of ageing coal plants and a rebound in gas power plant economics.

It also found that renewable energy’s share in the mix will gradually increase, as the UK maintains its position as global leader in offshore wind deployment.

Other forecasts include that the contribution of coal will erode entirely over the next 10-year period, in line with the government’s pledge to shut all coal facilities by 2025 – a view backed by its implementation plan for phase-out published in January – and April’s announcement that the UK had set a new record by not using coal for 55 hours.

Despite the government’s efforts to expand the nuclear sector, most notably through the development of Hinkley Point C, the proportion of nuclear power is also expected to fall within the next decade to just under 10 per cent in 2027, from around 20 per cent currently.

This view, said BMI Research, was supported by news in April that quality control failings had been found at EDF’s Flamanville nuclear plant, which could delay Hinkley Point C’s construction as it uses the same nuclear reactor prototype.

BMI’s report also predicts that:

  • Non-hydro renewables capacity will increase by an annual average of 3.9 per cent between 2018 and 2027, to reach nearly 57GW, primarily driven by the offshore wind sector, which remains an “investment bright spot” due to continued government support.
  • Growth in onshore wind and solar power will slow as the sector moves away from subsidy schemes towards the CfD mechanism.
  • Potential is growing for unsubsidised solar projects in the UK.
  • Electricity consumption will remain flat over the next 10 years, with annual average growth of 0.3 per cent between 2018 and 2027.

Added to this, improved political stability – helped by a lower risk of a fresh leadership challenge, snap election or second referendum in the short term – reduces uncertainty for the energy sector and the chances of a sharp fall in spending.

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