The Eggborough coal-fired power station in Yorkshire is to shut down after failing to secure new supply contracts for backup power next winter.
The plant, which started producing electricity in 1970, is capable of supplying 5% of power in the UK – enough electricity for two million homes.
Owner Eggborough Power Ltd, which has a Capacity Market contract until September 2018, said it would not be economically viable to continue to operate the power station after that.
Around 130 jobs are expected to be lost but 40 staff will remain to support the decommissioning and demolition phase.
Managing Director Adam Booth said: “With the age of the plant and the current government’s policy that all UK coal-fired power generation must cease by 2025, Eggborough has been under threat of closure for the past few years.
“Eggborough has a proud history of generation and a dedicated and skilled workforce. We will work through the consultation with employee representatives and provide support to employees throughout this process.”
A planning application is currently being progressed to develop a new 2.5GW combined cycle gas-fired power station at the site.
The Capacity Market for delivery in 2018/19 closed at £6/kW – the lowest of any auction to date.
Energy and Clean Growth Minister Claire Perry said: “With the government’s intelligent intervention through the Capacity market, we have achieved an even higher standard of energy security for next winter and at a low cost for billpayers.”