I missed that E.ON have shelved their plans for CCS at a new coal plant at Kingsnorth. They have cited poor economics as the reason - current power prices being depressed by lower demand because of the recession. This is yet another indicator that the power market mechanism must be changed - again.
The problem of prices trending towards short-run marginal cost whenever there is over-capacity is one that exercised me and colleagues when I was part of the industry years ago. Immediately after privatisation it wasn't a problem as there were really only two price setters in the market - PowerGen and National Power - everyone else was a price-taker. However, enforced divestment and revised market rules changed all that. The consumer has benefitted in the short term by enjoying relatively low prices. However, the pay-back may yet be to come unless some way of properly pricing in carbon and of getting more long-term certainty of prices can be found. If not, we could head towards the extreme economic signals of blackouts!
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