Capacity Market ‘hasn’t used taxpayers’ money well’

The government scheme that ensures there’s sufficient energy supply to keep the lights on during peak winter periods hasn’t made the best use of taxpayers’ money. That’s the view of […]

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By Priyanka Shrestha

The government scheme that ensures there’s sufficient energy supply to keep the lights on during peak winter periods hasn’t made the best use of taxpayers’ money.

That’s the view of Andrew Anderson-Shepherd, Project Manager at BIU, who believes the Capacity Market mechanism doesn’t tackle the energy trilemma as it has failed in supporting cleaner forms of generation.

Under the scheme, power plant owners are paid to provide electricity at short notice especially when demand is high.

National Grid has so far held two auctions to reserve capacity for winter 2018/19 and 2019/20, with a £2.8 billion bill in total for consumers.

The grid operator had intended for the scheme to start providing back up capacity from the latter year but it could be brought forward following DECC’s new package of reforms published in March.

Mr Anderson-Shepherd told ELN the auction backed a number of heavily polluting fossil fuel generators and has “unnecessarily supported power stations” that would have remained open with or without the scheme.

Around £175 million of public subsidies were awarded to diesel generators.

He said although the scheme has been successful in securing enough supply for the coming winters, work needs to be done to make the process more efficient and satisfy a greater proportion of the UK’s energy trilemma of security of supply, environmental sustainability and affordability.

He told ELN: “The Electricity Market Reform was there to make sure generation was there at times of peak demand but it was also to ensure that investment took place in clean generation going forward. In that respect, it certainly seems to have failed quite considerably.

“As far as nuclear is concerned, they have benefitted generously from this which again is taxpayers’ money. The mechanism has done its job but effectively we are paying additionally for the benefit of this.”

With coal-fired power plants closing by 2025, renewables being intermittent and nuclear plants taking years to be developed, Mr Anderson-Shepherd believes gas is the option going forward.

He said: “If you look at UK gas supply and where prices are at the moment, the UK is very well supplied. We’ve seen a huge surge in LNG and potentially fracking is an option.

“Gas is the fuel that can potentially keep the lights on but the mechanism in place trying to make sure that happens is effectively subsidising those forms of generation that are polluting and expensive and not really encouraging investment in new gas-fired generation.”

However he added there will be a review of the Capacity Market and “there is hope for new gas-fired generators”.

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