LONDON Carlton Power has given up a 450 million pound subsidy for its gas project in Manchester, Britain, its developers said on Tuesday, because it failed to secure investment needed to build the plant in time to produce electricity by late 2019.
Carlton Power said it still planned to go ahead with the project, which with almost 2 gigawatts (GW) of capacity would be able to provide power to more than 2 million homes.
The Trafford gas-fired power station was the only new large-scale gas plant to get financing under the government's capacity market scheme, designed to secure the country's electricity supplies.
"We did not have sufficient certainty that our Trafford combined-cycle gas turbine project (CCGT) would be completed in the time required," the company said in a statement.
The subsidy, secured in the 2014 capacity auction, was worth around 30 million pounds a year for 15 years. Under the contract Trafford would need to start producing electricity by late 2019.
Britain began capacity auctions in 2014, looking to head off future power shortages as coal and older nuclear plants close and low power prices dissuade investors from building new ones.
Despite the subsidies, investors are concerned about the uncertainty of revenues from new gas plants, Carlton Power said.
"The current arrangements for supporting the development of new generation capacity do not give sufficient comfort for this to be brought forward without substantial and unacceptable risk to investors," it said.
The company said it would discuss with the Department for Business, Energy and Industrial Strategy (BEIS) ways overseas firms could be encouraged to invest in new gas plants in Britain.
($1 = 0.8088 pounds)
(Reporting By Susanna Twidale; editing by Susan Thomas)