Britain's ageing Eggborough power plant to close

(Adds detail, auction winners, comment)

By Nina Chestney

LONDON, Feb 2 (Reuters) - One of Britain's oldest coal-fired power plants will close at the end of September after it failed to secure an agreement to provide back-up electricity on Friday, the operator said.

Eggborough power plant in Yorkshire was built in 1970 with an expected lifespan of 25 years. It has capacity of 2 gigawatts and supplies about 5 percent of the country's electricity, equivalent to powering 200 million homes.

But on Friday it failed to win a contract for providing back-up electricity generating capacity for 2018/2019, effectively cutting the thread by which it had been hanging. The plant had been due to close last March but won a contract that extended its life by a year.

“With (Other OTC: WWTH - news) the age of the plant and the current government’s policy that all UK coal (Other OTC: UKCLF - news) -fired power generation must cease by 2025, Eggborough has been under threat of closure for the past few years," said Eggborough Power managing director Adam Booth.

The plant will continue to meet its obligations under the current capacity market contract, which runs to the end of September, but without a contract for future years it will not be economically viable to continue operations, the company added.

The number of potential redundancies are subject to consultation but a number of roles might be needed to support decommissioning and demoliton beyond September, it said.

A planning application is being progressed to develop a new 2,500 megawatt gas-fired power station (CCGT) at the site, but it is unlikely to be operational until the early 2020s.

Britain began capacity auctions in 2014, looking to head off future power shortages as coal plants close and as investors find little incentive to build new power plants.

The auctions reward successful bidders for keeping power plants on standby so they can be called upon when renewable energy production is low or demand is high.

In its latest capacity auction, Britain secured 10.66 gigawatts of backup electricity capacity for 2018/2019 at 6 pounds/kilowatt/year, National Grid (LSE: NG.L - news) data showed on Thursday.

EDF Energy won one for a unit at its West Burton A coal-fired power plant, while SSE (LSE: SSE.L - news) won one for its gas-fired power station at Peterhead.

RWE Generation failed to secure a contract for its Grimsby A gas plant but said that does not affect future operations. (Reporting by Nina Chestney; Editing by David Goodman)