£750m power station project in balance as funding is refused

The Department of Energy and Climate Change yesterday confirmed the Eggborough coal-fired plant would not be one of a clutch of clean energy schemes to receive key public funding support which led to renewed warnings of potential closure.

The power station, which employs more than 700 people, has drawn up advanced plans for a £750m project to convert to burning biomass but has said financing the development is not viable without Government backing.

Selby Tory MP Nigel Adams, whose constituency includes the power station, insisted the fight to secure Eggborough’s future would go on and said other avenues to funding would be sought.

But Eggborough Power Ltd chief executive Neil O’Hara said: “Unless a viable solution is found with Government, the most likely outcome now is that Eggborough will no longer be supplying electricity to the grid beyond 2015.

“Impending EU regulation and the escalating impact of the carbon price floor mean this is unfortunately the rational economic conclusion based on the information we have available at this time.”

Eggborough currently produces four per cent of the UK’s electricity and the company warned that one of the first impacts of the Government’s decision would be the shelving of a planned overhaul of one of its generating units. As a result, the unit would no longer be operational from next September which would remove one per cent of the UK’s capacity at a stroke.

Work was scheduled to start on the conversion scheme on January 6 but the company said an initial £17m contract with suppliers for preliminary work, which was due to be signed yesterday, had now been suspended.

Mr Adams said: “The Eggborough proposal made absolute sense. The station has limitations in terms of its future in relation to coal and biomass conversion would make it the single largest generator of renewable energy in Europe.”

The MP pointed to concerns about the lack of spare UK energy capacity which would be heightened if Eggborough was lost.

He added: “This is not game over for Eggborough. There are other ways we can make this work and that’s what we are striving to do from here on in.

“I’m very hopeful a workable solution can be found to make sure this crucial infrastructure project for my constituency and the Yorkshire region in terms of investment and jobs goes ahead.”

One avenue of potential funding maybe available from another Government scheme for long-term projects which comes on stream next year though there is no certainty another Eggborough bid would be successful.

A spokewoman for the Department of Energy and Climate Change said: “Business decisions are ultimately a matter for Eggborough’s owners, but a final decision on which projects will receive Government support under this process will not be made until next spring.

“There has been a high level of interest in investment contracts for renewable electricity generation but we have always been clear that the budget would be limited.”

Mr Adams did welcome Government confirmation the neighbouring Drax power station would receive funding to convert two of its generating units from coal to biomass.

The financial support is being delivered through ‘contracts for difference’ (CFDs), which are fixed-price long-term contracts to support the development of low-carbon electricity generation.

Drax chief executive Dorothy Thompson said: “We are pleased with the news that the Government has provisionally ranked our two projects highest amongst qualifying projects for early CFDs. This reflects the deliverability and cost-effectiveness of this important renewable technology.

“We will now participate in the next stages of this process, which will conclude with the award of investment contracts in spring 2014.”