The coal-fired Fiddler’s Ferry Power Station in Cheshire will close three of its four units by April this year despite having a contract to provide winter power until 2019.
The plant’s operator SSE blamed the closure on "challenging economic and environmental conditions for coal", which made it more reasonable to pay a £33m penalty for breaking the capacity market agreement with the UK government than continuing operations.
"The reality is the station is aging, its method of generating electricity is being rendered out of date, and it has been and is expected to continue to be loss making in the years ahead,” said Paul Smith, SSE managing director.
"Sustaining for too long loss-making power stations would undermine SSE's ability to invest in modern generation plants in the UK."
The plant has been struggling with economic losses in recent years and according to SSE the capacity market contract binding the operator to make sure there is enough power available to the grid during the winter period 2018/2019 wouldn’t be sufficient to reverse the situation.
"SSE's intention to break their contract is extremely disappointing and they will have to pay a significant penalty," said a spokeswoman for the Department of Energy and Climate Change.
"We are clear that delivering energy security for our families and businesses is non-negotiable. There will be no impact on this winter and action has already been taken to secure extra capacity for next winter. We will continue to work alongside National Grid and Ofgem to take whatever additional steps are necessary to protect our energy supply."
The fourth Fiddler’s Ferry unit will remain operational as it has a contract under the capacity market scheme for next winter.
The decision to close down the three units was likely affected by the plant’s failure to secure a capacity market contract for 2019/2020 in the December 2015 auction.
The future of the plant, which has 213 staff, was, however, already sealed in November when the UK government announced its plans to phase out polluting coal-fired power plants by 2025 in favour of cleaner gas and renewable power generation.
SSE said it is entering into consultation with employees and stakeholders regarding the upcoming redundancies.
"The company has taken the decision to close the site which is clearly in line with Government policy which is determined to move from coal to gas in a shortened time frame,” said Unite national officer for energy Kevin Coyne.
"What we are witnessing is the latest glaring example of the Government discarding a role for coal in a future comprehensive energy strategy."
Prospect union negotiator Michael Macdonald said the loss of 220 highly skilled jobs resulting from the closure will have a "devastating effect on the area". Further contractor positions will also be lost.