Business

Gas plants lose out in power payout

pylon Image copyright AFP

No new large gas plants will be built as a result of a key government mechanism to ensure the lights stay on in the future.

Millions of pounds will be paid to heavily polluting diesel farms and coal plants instead, critics said.

The scheme, called a capacity market, awards contracts to encourage new power plants and ensure existing stations are available.

The government says it has secured future capacity at a low price.

Auction results

The capacity market is designed to ensure enough power is available four years from now.

An auction this week secured 46.35 gigawatts of power at a price of £18/KW. That was lower than the price achieved during the first capacity auction last year.

Existing gas, coal and nuclear plants received contracts. For the first time operators of large cables or interconnectors that carry power between the UK and mainland Europe won contracts too.

But the auction cleared a price too low to attract those planning to build new power plants, which are key to government plans to phase out coal in 10 years.

Coal and diesel subsidies

National Grid estimates that the auction will cost £834m in subsidies in 2019/20, which could add to household bills.

The environmental think-tank Sandbag says that £80m will be paid to subsidise old coal power stations.

It estimates that contracts worth £155m have now been awarded to owners of small heavily polluting diesel farms in the auction over the past two years.

"The capacity mechanism has failed to attract any new efficient gas plant... and it is paying coal to stay open longer than it would otherwise", said Dave Jones, a policy analyst at Sandbag.

The campaign group Greenpeace said that the auction demonstrated that the gap between what the government preaches and what it does on climate change is widening.

"The energy secretary is in the thick of crucial climate talks in Paris yet her department has just lavished million-pound subsidies on some the dirtiest energy sources on the planet," a spokesperson said.

Winners and losers

Centrica, SSE and power generator Drax received contracts, as did all of EDF's nuclear plants.

Some new gas plants will be built, but these will be small-scale operations.

Independent generator UK Power Reserve said it had secured contracts for 160MW of this sort of plant.

But no new large gas-fired plants won contracts, other than a new station at Carrington in Greater Manchester which is nearly complete.

"If the government wanted new build gas, it's not happening," an executive at one of the big six energy suppliers told the BBC.

Auction 'good deal for consumers'

The government has already said that it will reflect on the results of the auction.

Energy Minister Andrea Leadsom said: "This result represents a good deal for customers - fierce competition in the capacity market has driven down costs, meaning future capacity has been secured the lowest price possible."

Related Topics

More on this story