Keadby 2 secures 15-year contract in T-4 Capacity Auction

SSE has secured a 15-year capacity agreement for its 840MW Keadby 2 CCGT in North Lincolnshire, which is expected to become the cleanest and most efficient gas-fired power station in Europe when completed in 2022.

The results of the T-4 Capacity Auction in Great Britain were published on Friday 6 March, with SSE provisionally securing contracts for a total de-rated capacity 3,594MW.

In total, 43,749MW in capacity contracts were awarded to electricity generators at an auction clearing price of £15.97/kW. This auction relates to the capacity year 2023/24, which runs from 1 October 2023 to 30 September 2024.

The contracts secured by SSE comprise 888MW of hydro-electric and pumped storage capacity and 2,706MW of gas-fired and embedded capacity.* This includes the company’s Keadby 2 CCGT which is currently under construction in North Lincolnshire, as well as its existing Peterhead CCGT in Aberdeenshire.

SSE’s Keadby 2 CCGT will bring first-of-a-kind, super-efficient gas turbine technology from Siemens to the UK. As a new-build, the station has received a 15-year capacity agreement at a de-rated capacity of 803.7MW. The station will also be capable of being upgraded to decarbonise its generation through the use of carbon capture and hydrogen technology, as routes to market develop.

However, SSE is disappointed to note that its existing Medway and Keadby 1 CCGTs have not received capacity contracts on this occasion. This result will not impact existing operations at the stations, which currently have contracts in place until September 2022. The stations will have opportunities to secure further capacity agreements in future auctions.

The total value secured by SSE in this T-4 auction for 2023/24 is around £57m. To secure the revenue arising from the capacity market, generators must produce electricity or reduce demand when the system requires; failure to do so will result in penalties being levied.

Stephen Wheeler, Managing Director of SSE Thermal, said:

“We are delighted to have provisionally secured a 15-year contract for our new Keadby 2 CCGT. When completed, Keadby 2 is expected to become the most efficient gas-fired power station in Europe, replacing older, less-efficient generation, and facilitating increased renewables on the system. The station is also capable of being upgraded to reduce carbon emissions further through the use of Carbon Capture and Storage (CCS) or hydrogen technology, as routes to market develop.

“On the other hand, we are disappointed not to receive a contract for our operational Medway and Keadby 1 CCGTs. SSE believes that flexible and efficient gas-fired generation is crucial in the transition to net zero as it complements increasing levels of renewables on the system and helps to ensure security of supply for customers.”

The provisional results are subject to confirmation by the Secretary of State for Business, Energy and Industrial Strategy (BEIS).

*A de-rating factor is applied to each station according to rules set by the UK Government.