Czech utility buys UK-based Lynemouth Power Station

By Erin Voegele | January 12, 2016

On Jan. 8, RWE Supply and Trading announced it has sold the Lynemouth Power Ltd., the operator of the U.K.-based Lynemouth Power Station, to EP UK Investments Ltd. (EP UK), a subsidiary of Czech utility company Energetický a prumyslový holding (EPH).

The 420 MW coal-fired station has been working with contractors to design a technical solution for a full conversion to biomass. The project is being supported by a Contract for Difference (CfD) from the U.K. government.

“We are pleased that EPH has made this investment and look forward to working closely with the Lynemouth Power team and its contractors to reach final investment decision,” said Neil O’Hara at EP UK said. “ Whilst we are working under tight time constraints and challenging foreign exchange conditions we believe that with the continuing efforts of the Lynemouth team and the on-going support of the contractors the business will achieve its ambitions.”

In early December, the European Commission announced that U.K. support for the conversion of the Lynemouth power station from coal to biomass complies with EU state aid rules.

The Lynemouth conversion is one of eight renewable energy projects selected for the first contracts under the U.K.’s electric market reforms. In 2013, the U.K. Department of Climate Changed announced that the government had sent out draft investment contracts to a total of 16 renewable energy projects that had progressed to the next stage of the final investment decision (FID) enabling for renewables process. In mid-December 2013, DECC announced that only 10 of those projects had been found to be provisionally affordable under the budget caps released earlier that month. The list of projects was later reduced to eight. Those projects, including the 299 MW biomass-fired Teesside project, a Drax biomass unit conversion, and the Lynemouth Power biomass conversion signed contracts in June 2014, along with five off-shore wind projects.

In February 2015, the EC announced it was opening an in-depth investigation to assess whether the U.K.’s plans to support the biomass conversion of the coal-fired Lynemouth power plant are in line with European Union state aid rules. According to information released by the EC at that time, the investigation aimed to ensure public funds used to support the project are limited to what is necessary and do not result in overcompensation. The investigation was also to assess whether the positive effects of the conversion in achieving EU energy and environmental objectives outweigh potential competition distortions in the market for biomass.

In a statement issued Dec. 1, the EC said that in light of the comments received from interested third parties as well as detailed technical information submitted by the U.K., the commission is now satisfied that the submitted parameters are robust and present no risk of overcompensation. The commission also indicated its investigation did not find any evidence of market distortion in the global wood pellets market and noted it is satisfied that the measures will not lead to undue distortions of competition in the market for other wood-based products.

Once the conversion is complete, the Lynemouth facility will have the capacity to generate 420 MW of electricity from wood pellets. The U.K. government intends to support the project in the form of a premium paid on top of the market price of the electricity generated, known as a Contract for Difference (CfD). The project will receive aid until 2027 and, according to U.K. estimates, will generate about 2.3 TWh of low-carbon electricity per year. The plant is due to use approximately 1.5 million metric tons of wood pellets per year, mainly sourced from the U.S., Canada and Europe.

On Dec. 22, the Lynemouth facility announced it had burnt its last coal. “The ending of coal burn is undoubtedly a significant event in the stations 43 year history, Lynemouth has a tremendous workforce and we now look forward to an exciting future with the conversion to biomass generation,” said Vaun Campbell, managing director of the facility, in a statement released Dec. 22.