ScottishPower has become the first vertically integrated power company in the U.K. to renounce fossil-fuel generation.

The company, a subsidiary of the Spanish energy giant Iberdrola, this week announced it is selling close to 2.6 gigawatts of fossil-fuel and hydro generation capacity to Drax, the owner of Europe’s biggest biomass-fueled power station, for £702 million ($926 million) in cash.

Included in the sale are four combined-cycle gas turbine plants in England, totaling 2 gigawatts of capacity, plus two Scottish hydro plants with a combined 126 megawatts, and a 440-megawatt pumped hydro storage plant, also in Scotland.

The deal is subject to approval by Drax shareholders, ScottishPower said, and does not include a gas storage plant in Hatfield Moor, near Doncaster in Yorkshire. Drax leaked news of the talks to the U.K. press in September.

Drax is interested in diversifying its generation base to reduce its dependence on coal and biomass subsidies, according a report in the U.K.’s Sunday Telegraph.

ScottishPower said the move is part of a major strategic restructuring that would also see it investing £5.2 billion ($6.9 billion) over four years to develop smart grids and more than double its existing renewable energy capacity in the U.K.

The company has 2.7 gigawatts of wind power capacity operating or under construction in the U.K., and a pipeline of future projects amounting to more than 3 gigawatts. Of this, 2.9 gigawatts are in offshore wind.

Included in ScottishPower's portfolio are the 714 megawatts of offshore wind already under construction at East Anglia ONE. This project, off the east coast of England, will be the world’s largest offshore wind farm when it enters operation in 2020.

“The company is closely following the proposals by the Crown Estate and Crown Estate Scotland, with ambitions to secure additional development areas in the next round of offshore wind leases throughout the U.K.,” said ScottishPower in a press note.

ScottishPower has closed all of its coal plants in the last decade, it said. With the sale of the remaining gas and hydro stations, the company will now get 100 percent of its own electricity generation from wind power.

Paul Ferguson, ScottishPower’s senior media relations manager, told GTM that ScottishPower would continue to rely on energy trading to deliver electricity and gas to its retail customers. “In our generation business, we have sold anything that is not wind power,” he said.

“Onshore wind power is now the cheapest form of new-build electricity generation in the U.K., so we’re keen to build as much of that as we can,” he said. “Offshore wind has seen massive cost reductions recently as well, so we’re keen to build as much of that as we can.”

The more wind power ScottishPower has, the cheaper electricity would become for consumers, he said. 

As it stands, ScottishPower’s wind generation capacity is not sufficient to cover peak demand from its retail business, which supplies more than 5 million households and businesses across the U.K.

And figures from the company’s website show that between 2017 and 2018 ScottishPower’s energy mix was actually more carbon-intensive than the national average for the U.K. The company’s mix only included 15 percent renewables and 10 percent nuclear, compared to 29 percent renewables and 20 percent nuclear for the U.K. as a whole.

Moving to a 100 percent renewable energy generation portfolio was part of a broader strategy by Iberdrola to cut carbon emissions 30 percent by 2020 and be carbon-neutral by 2050, Ferguson said. 

Iberdrola has the world’s largest wind generation portfolio and in February announced an asset rotation plan that would see a reduction in its fossil-fuel based assets in favor of renewables.

Worldwide, the company has 29.6 gigawatts of renewable generation capacity, along with 14 gigawatts of combined-cycle gas, 3 gigawatts of nuclear, 1.3 gigawatts of cogeneration and 874 megawatts of coal.

In an Iberdrola Group press release issued this week, Ignacio Galán, the group's chairman, said: "The world is changing. The energy companies should be part of the solution to climate change and not part of the problem.”


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