Major power utility E.ON’s move to supply its residential customers with 100-per-cent renewable electricity could potentially influence the Big Six to move towards renewable energy, and signals a changing trend in the UK power market, according to leading analytics firm GlobalData.

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With the UK aiming to phase out all its coal-fired plants by 2025, the Big Six (British Gas, EDF Energy, E.ON SE, npower, Scottish Power and SSE) have been focusing more on gas-fired and renewable energy projects – not least because they now present the more economical options. 

 

According to GlobalData, the average project cost of a coal-fired plant at the end of 2018 in the UK was US$2,811.1 per kW. Comparatively, a gas-fired plant had a project cost of US$1,191.7 per kW, onshore wind with US$1,999 per kW and solar photovoltaic (PV) with US$1,559 per kW in 2018. Therefore, the focus is shifting away from the construction of coal-fired plants.

 

Re-alignment of the Big Six’s generation fleet

 

“The Big Six hold more than 70 per cent 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,” advised Mohit Prasad, Project Manager at GlobalData. “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.

 

Project cost of renewables is declining

 

“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,” observed Mr Prasad, whose firm asserts that the average project cost of solar PV installations declined sharply from US$6,678/kW to US$1,560/kW between 2010 and 2018. During the same period, the cost of onshore wind declined from US$2,200/kW to US$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,” Mr Prasad concluded.