The gas fired Grain power station, operated by Uniper SE, near Rochester, U.K., on Tuesday, Jan. 4, 2022. Photographer: Chris Ratcliffe/Bloomberg Photo by Chris Ratcliffe /Bloomberg
LONDON: A pair of gas-fired power stations earned over £1mil (US$1.3mil) each in a handful of hours last week when the wind was barely blowing.
The move involved announcing a cut off in electricity production, ahead of the busiest evening periods and then offering to keep the station on at a higher price to meet a potential shortfall it helped create.
The plants are run by a division of Vitol SA and by a company owned by Czech billionaire Daniel Kretinsky.
Regulator Ofgem issued new rules to cut down on plants that were artificially inflating prices because it can lead to higher power prices for consumers.
A version of the behavior was identified in an investigation by Bloomberg last year.
A representative for the owner of one of the plants, Kretinsky’s Epuk Investments Ltd, said that it’s the grid operator’s decision which power plants to select to manage the network and the price offered by its plant was in line with others at the time.
Ofgem’s rule change targeted operators that made changes to generation plans within the same day, while this station alerted the grid operator about its plans a day ahead of time, according to the company spokesperson.
A representative for Vitol’s VPI Immingham LLP declined to comment.
It’s an example of how a slump in renewable output can create price spikes at times when fossil fuels are needed to step in as back up.
Gas plant operators said they need these price surges to stay profitable as stations become gradually crowded out by renewables, running for fewer hours each year.
A unit of the South Humber Bank gas station, owned by Epuki, was producing electricity in the morning on Dec 12 before indicating it would shut off in the early afternoon.
With little wind, the country was using a record amount of gas plants to keep the lights on, according to publicly available grid data.
Prices jumped to more than double this year’s average.
Some gas plants take about six hours to cool down before being able to generate again, meaning that if they threaten to switch off before the highest demand periods in the early evening, it risks leaving the system short on power.
That can push the grid operator to accept the plants’ high charges to stay operational, using money that’s ultimately added to consumer bills. — Bloomberg
