UK Renewable Companies In Focus After Coal-Fired Power Plant Closure

UK renewable companies will benefit from the closure of the country’s last coal-fired power plant, ending its 140-year reliance on coal to generate electricity.

The Ratcliffe-on-Soar plant has been operational since 1967. Its closure on September 30 is a milestone in the country's commitment to reaching net-zero emissions by 2050.

The closure comes after British consumer confidence plummeted in September on concerns about the country's weak economic performance. The UK reported GDP of 0.5% for the second quarter of this year, a revision down from 0.6%. 

Britain's energy regulator, Ofgem, set an energy price cap at around £1,717 per year, a 10% increase of £149. This was done to alleviate energy price pressures on the British public. 

Energy prices in the UK, source: Ofgem

UK energy prices have been regulated since 2019 but experienced the worst increase between August 2021 and August 2022. Then wholesale prices rose by more than 500%. Russia's invasion of Ukraine, the closure of Nord Stream 1, and infrastructure issues were the main reasons behind this trend.

“None of us imagined a future without coal generation in our lifetimes,” Peter O’Grady, the plant's manager, told the BBC. “I am incredibly proud to be part of this energy milestone as the country focuses on a cleaner energy future.”

UK Renewable Companies Will Benefit As Coal Phased Out

Despite the push for renewables, the UK still lacks large, publicly listed pure-play renewable companies. 

However, Good Energy Group GOOD, a UK renewable company founded in 1999, is well-positioned to benefit from the sector's growth. The company focuses on electricity generation from wind and solar sources and offers various renewable energy services.

Good Energy Group has significantly improved its financial standing recently, reducing its debt-to-equity ratio below 10%. The company now holds a substantial cash balance equivalent to 80% of its market capitalization. 

Although the company is currently unprofitable, its P/S ratio is only 0.3x, and its forward P/E ratio is 6.22x.

CEO Nigel Pocklington said in September on a recent earnings call that he was optimistic about the regulatory tailwinds.

The Labour government’s policy agenda "is favorable, with changes to planning reforms and a focus on community energy and rooftop solar," he said. "These align with Good Energy’s core purpose and position."

He also noted that he plans to look for acquisitions to expand the national footprint and scale up the operations to benefit from demand in the sector.

New Task Force Supports UK Renewable Companies

To facilitate the country's transition to renewables, the UK reactivated its Solar Energy Taskforce. It brings together the Department for Security, Energy & Net Zero, regulators, and industry leaders to update Britain's solar energy roadmap.

“The relaunch of the Solar Taskforce is essential for accelerating action and innovation in our journey towards clean power by 2030," Energy Secretary Ed Miliband said. "Solar energy will be a key driving force behind our clean power mission.”

The government's ambitious goals have been dubbed a "solar rooftop revolution," with installation on millions of homes and businesses. Initial plans reach as much as 2GW of capacity.

UK Renewable Energy May Hurt Competitiveness

While the UK has phased out its coal-fired power plant, coal remains an essential energy source in many parts of the world. 

Critics have questioned whether the UK can compete with other economies still reliant on coal. 

Globally, coal still accounts for about 35% of electricity generation, and demand remains robust, particularly in China and India. In 2023, China alone accounted for two-thirds of newly commissioned coal power plants globally, CNBC reported.

Coal production worldwide 2000-2023, source: Statista

Despite efforts to reduce reliance on coal, the steel industry is heavily dependent on coking coal. Efforts to reduce carbon emissions require a switch to higher-grade iron ore. 

For that purpose, China has partnered with Rio Tinto, investing billions in a Simandou iron mine in Guinea—the largest global mining project.

UK Closes First Coal-Fired Powel Plant In World

For the UK, the closure of Ratcliffe-on-Soar is the end of an era. 

The UK’s coal-fired power era began in 1882 with Thomas Edison’s Holborn Viaduct plant – the first in the world. At the time, coal was abundant and became the backbone of Britain's industrial growth.

Coal played a cornerstone role in shaping the UK, ushering in the era of railways and factories that powered the country's economic expansion.

“The closure of the Ratcliffe power station marks the end of an era, and coal workers can be rightly proud of their work powering our country for over 140 years," Energy Minister Michael Shanks said. “However, a new age of good energy jobs is just beginning as we move towards cleaner, more sustainable sources of energy.”

Disclaimer:

Any opinions expressed in this article are not to be considered investment advice and are solely those of the authors. European Capital Insights is not responsible for any financial decisions made based on the contents of this article. Readers may use this article for information and educational purposes only. 

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.