July 29, 2014 / 1:25 PM / 5 years ago

Barking Power Station in east London to close within two years

LONDON (Reuters) - The operators of a major gas-fired power station in the east of London have begun negotiations over the facility’s closure due to poor market conditions.

Because gas prices have been high relative to wholesale electricity, which power generators sell into the grid, aging power stations such as Barking with relatively low efficiency grades struggle to make a profit.

The closure comes as low generation profit margins have led to an investment shortfall in new British capacity and the shuttering of several gas-fired power stations over recent years.

At the same time, most British coal-fired facilities are having to close due to environmental legislation. These factors combined are leading to a generation shortfall, which grid operator National Grid (NG.L) says could lead to power outages in the next few years unless new facilities are built soon.

Barking Power Station was completed in 1995 and has a capacity of 1,000 megawatt (MW), enough to supply over half a million homes with electricity.

“The proposal to close the power station and embark on these consultations is taken in the context of the current adverse market conditions for gas-fired power generation,” the facility’s owner Barking Power Ltd [THPWRB.UL] said in a statement on Tuesday.

“If implemented, the full closure of the station is expected to be completed within two years,” it added.

The power station is operated by a company called Thames Power Services Ltd and employs 38 people.

“The (Barking) power station was ... constructed in the early 1990s ... It therefore has a lower thermal efficiency than power stations designed and built more recently,” Barking Power said, adding that the facility had already been operating below full capacity in recent years.

Barking is one of around 20 electricity generation facilities in greater London, which include stations fueled by oil, coal, natural gas and renewables.

Reporting by Henning Gloystein; Editing by David Holmes

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