Analysis

Capacity market secures some new gas while providing stay of execution to old coal

  • 19 Dec 2014, 08:20
  • Mat Hope

Didcot power station | Andrew Smith

  • Government agrees to pay companies £19.40 per kilowatt to keep fossil fuel power plants available
  • Only five per cent of projects included in capacity market are new builds
  • Coal and biomass plants account for 20 per cent of the capacity made available under the market
  • Scheme expected to add £11 to consumer bills, of which only 54 pence goes towards building new, less carbon intensive, capacity

A new government policy designed to ensure the UK's future energy supply appears to have successfully incentivised companies to build over two gigawatts of new gas power, to sit alongside nine gigawatts of coal and biomass power. It should ensure the UK will have at least 48.6 gigawatts of fossil fuel power stations available in 2018.

The Department of Energy and Climate Change today released the  results of its first capacity market auction. It guarantees new gas plants will get paid £19.40 for each kilowatt of power capacity companies make available at the flick of a switch. The auction's biggest winner was gas power, with around 25 gigawatts of new and existing gas power plants receiving contracts.

But only five per cent of the capacity that secured contracts will be newly built, leading to concerns that the UK could be locked into using high carbon power sources during the 2020s.

While some have emphasised the lower than expected price as good for consumers, it may also have a knock-on effect on the UK's decarbonisation plans. We take a look at the auction's result, and what it may mean for the UK's future energy mix.

The capacity market

The government introduced the capacity market to try and ensure there is always enough power generating capacity available to meet demand, even when intermittent renewables are generating less electricity. The capacity market offers companies a set price if they promise to keep a particular amount of generation available, should it be needed.

To agree the price, this week the government conducted a 'descending auction'. The auction took place over four days, with the government and companies eventually settling on a price of £19.40 per kilowatt yesterday afternoon.

 

 

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UK energy statistics: Gas power increases, renewables cover nuclear shortfall and power consumption falls

  • 18 Dec 2014, 11:45
  • Mat Hope

Tilbury power station | Shutterstock

The price of fossil fuels remains the main driver determining the UK's energy mix,  new government statistics show, despite renewables increasingly covering large power station outages.

We take a look at the Department of Energy and Climate Change's latest  quarterly energy trends statistics.

More gas power

The UK's gas generation increased significantly from July through September compared to the three months before, as gas prices continued to fall. At the same time, a slight increase in renewable generation helped to cover a power gap left by the unexpected closure of two nuclear power plants  in August.

Both factors significantly altered the face of the UK's electricity generation in the third quarter of 2014.

Gas accounted for 38 per cent of the UK's electricity generation in the third quarter, eight per cent more than in the previous three months, and 12 per cent more than at the same point a year ago. That meant companies burned a lot more gas than in the previous quarter - about another million tonnes of oil equivalent.

electricity mix q3 2013 vs 2014.png
Source: Data from the  Department of Energy and Climate Change. Graph by Carbon Brief.

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Government holds first capacity market auction

  • 16 Dec 2014, 09:45
  • Mat Hope

High Marnham | Shutterstock

Companies will today bid for government subsidies to ensure power plants are available at the flick of a switch, as part of the new capacity market. The market is designed to ensure the lights always stay on, even when demand is high and the weather means renewables aren't generating electricity.

Under the scheme, power providers are paid to be available when the National Grid needs them. But it's not yet clear which power stations will be included in the scheme. That's important, as it will determine how much coal, gas, or oil gets burned for power generation, and what the impact on the UK's emissions will be.

The capacity market's first auction begins this morning. We explain how the market works, and how it fits with the government's wider energy and climate change policy goals.

Making a market

Even though  electricity demand is gradually reducing, the UK's peak demand isn't shrinking much, and is set to remain at around 53 gigawatts.

The UK has lots of old coal, gas and nuclear power plants. As they age, they get more prone to breaking, so if the power companies don't want to invest millions in upgrading them they usually shut them down.

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Low carbon policies could cut household energy costs after 2030, Committee on Climate Change says

  • 10 Dec 2014, 00:01
  • Mat Hope

Windfarm in field | Shutterstock

Investing in low carbon energy generation could lower future household energy bills and insulate the economy from volatile fossil fuel prices, the government's official climate change advisor says. But only if the government commits to implementing long-term climate policies.

A new report from the Committee on Climate Change (CCC) assesses the impact of the UK's low carbon policies on consumer energy bills. It expects households to pay more to decarbonise the UK's energy sector in the coming decades, but says that doing so should ultimately save people money as well as helping the UK hit its legally binding climate goals.

The committee's conclusion mirrors that of  government analysis earlier this month that showed energy bills would rise significantly if the UK fails to implement climate policies.

Bill projections

The government is legally obligated to cut the UK's emissions, the committee points out. Some policies to cut emissions are paid for by households through a levy on their energy bills. While such levies are set to increase, decarbonisation should lower electricity prices in the long run and cut demand, meaning households save money overall, the committee says.

The Climate Change Act of 2008 requires the government to cut emissions  80 per cent by 2050. With about  35 per cent of the UK's emissions currently coming from the energy sector, that means some pretty significant changes to how the country generates electricity.

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Dissecting Germany’s new climate action plan

  • 04 Dec 2014, 15:15
  • Mat Hope

Germany wind turbines | Shutterstock

Germany has implemented a series of ambitious polcies to decarbonise its economy. But despite significant investment in renewable energy, the country's emissions have been rising for the last three years. Yesterday, the government  announced new measures to get the country back on track.

We take a look at Germany's new climate action plan, and what it means for the country's long term decarbonisation prospects.

Closing the 'climate gap'

In 2010, Germany announced ambitious plans to decarbonise its energy sector and cut emissions. The plan has become known as the 'energy transition', or  Energiewende.

At the heart of the Energiewende is a goal to cut emissions 40 per cent by 2020, compared to 1990 levels. The target is considerably more ambitious than the EU's goal to cut emissions 20 per cent by 2020. Germany also aims to cut emissions at least 80 per cent by 2050.

The problem is, Germany's emissions have been  increasing for the last three years. Germany's government acknowledged that if emissions continued to rise, the country would miss its 2020 target by five to eight per cent.

Screen Shot 2014-12-04 at 10.52.14.png
Source:  Clean Energy Wire. Graph by Carbon Brief.

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A summary of climate and energy announcements in the Autumn statement 2014

  • 03 Dec 2014, 13:00
  • Carbon Brief Staff

Osborne statement | BBC

  • £2.3 billion for flood defences
  • £15 billion for road upgrades
  • Tidal lagoon energy project included in national infrastructure plan
  • £430 million in tax cuts for the North Sea oil and gas industry
  • Sovereign wealth fund for shale gas proceeds in the north of England

Chancellor George Osborne today announced new funding for flood defences, more roads, and support for a new tidal energy project.

The policies were part of the Autumn statement, effectively a mini-budget. This year's statement gave the government a chance to offer some financial sweeteners to marginal constituencies ahead of next year's election.

Unlike  last year's statement, which was chock-full of changes to climate and energy funding, today's announcement was a sparser affair. Here's a summary of the key climate and energy policy announcements.

Flood defences

The Treasury today unveiled its plan to allocate flood defence funding to vulnerable parts of the country, and assess funding needs for the next fifty years.

The planned £2.3 billion investment is expected to deliver better flood protection to 300,000 households across the Thames and Humber estuaries, Oxford, Lincolnshire and Somerset by 2021.

The government came under fire earlier this year for slashing flood defence grants to the Environment Agency by £138 million to help reduce the deficit. Many parts of the country experienced  severe flooding after prolonged heavy rain.

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Climate policy goes commercial: E.ON takes advantage of the new economics of a low carbon energy market

  • 02 Dec 2014, 17:15
  • Mat Hope

E.ON logos | Shutterstock

German energy company E.ON yesterday announced it was splitting the company in two,  "spinning off"  its fossil fuel assets. The reason for the move? The European energy market's trend towards low carbon energy sources and services, and the ever decreasing profitability of fossil fuels, it says.

The move is being hailed as a  "watershed moment" for Germany's  ambitious efforts to decarbonise its energy sector.

But why does E.ON think its new model is more profitable? And why aren't all energy companies doing the same?

Energy transformation

E.ON's decision to restructure has more to do with a need to do something about its bottom line than environmental concerns. E.ON's profits  fell by 20 per cent over the last 12 months, continuing a long term decline.

That was partly as a consequence of Germany's ambitious climate and energy policies, known as the  Energiewende. Germany aims to get 80 per cent of its electricity from renewable sources by 2050. Currently, it gets about 30 per cent, up from about 15 per cent when the Energiewende was announced in 2010.

Renewables' rapid expansion has made the wholesale cost of electricity plummet, and put many of Germany's big utility companies with large stakes in fossil fuels under  severe financial pressure.

The German government is also pressing ahead with a plan to phase out nuclear power by 2022. That's bad news for E.ON, which has a stake in 11 of the country's nuclear plants.

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Europe’s energy and climate policies get mixed review

  • 01 Dec 2014, 11:00
  • Simon Evans

Windfarm | Shutterstock

The European Union is a global leader on climate change, but there's still plenty of room for improvement. That's the conclusion of a new energy policy review from influential thinktank the International Energy Agency (IEA).

The report summarises the big issues countries face when trying to decarbonise their energy sectors while keeping the lights on and preventing energy bill hikes.

It argues against schemes to pay power companies to ensure they're always ready to supply energy when required, such as the  capacity market currently being introduced in the UK. It also calls for a higher EU energy efficiency target, expanding  energy efficient policies, rapid  reform of EU carbon markets and caution when assessing  shale gas's potential contribution to the energy mix.  

IEA publications tend to be fairly weighty and this is no exception. We've picked out some of the most interesting findings and recommendations from its 312 pages.

Shale gas pessimism

Back in 2012 the IEA published a widely-referenced report setting out how hydraulic fracturing of shale rocks could deliver a new "golden age" of natural gas. It said Europe could expect to produce 77 billion cubic metres of shale gas per year by 2035, about the same as the UK's annual demand.

That outlook was pared back in 2013, when the IEA  said countries were failing to replicate the North American shale gas revolution. Its new review is even less optimistic. It says the EU has yet to evaluate the potential of shale gas and has only "limited" exploration experience.

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The five massive changes to how we use energy that could limit climate change

  • 27 Nov 2014, 12:40
  • Simon Evans and Rosamund Pearce

Earth from space | Shutterstock

What would the world's energy system need to look like in 2040 in order to limit climate change to two degrees? What would it take to get there?

One possible set of answers to those questions has been provided by the International Energy Agency, which published its latest World Energy Outlook (WEO) earlier this month.

The WEO is a set of projections looking at the future of the world's energy system out to 2040. It explores three different ways today's energy system might evolve, depending on the policy choices we make now.

It looks at a world where no new policies are enacted, leaving us on a path towards nearly six degrees of warming. It considers a world where we stick to climate pledges made by governments but not yet fulfilled. These would reduce warming below four degrees.

Finally it considers the policy and energy system changes that would be needed to limit climate change this century to two degrees of warming above pre-industrial levels.

We've used the WEO's findings to produce a series of maps and charts illustrating the energy system we would need in 2040 to meet this goal. It's going to take some big changes, but it boils down to five massively ambitious steps.

2degreesscenario6nologo.png

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Is India’s prime minister, Narendra Modi, a climate leader?

  • 25 Nov 2014, 14:00
  • Mat Hope

Narendra Modi | Shutterstock

n May, Narendra Modi was sworn in as the new prime minister of India. Many hoped he would prove a  climate change champion. Six months later, those expectations have been tempered.

The next year is set to be crucial to the world's chances of agreeing a new global climate deal. The US and China recently signed  an historic deal to cut their country's emissions. But if the world is going to successfully manage the risks of climate change, it will need India to play its part too.

Given India's status as the world's third largest emitter, negotiators are eager for the country to play a productive role at climate talks. So do Modi's first six months give an indication of what stance India will take?

India's international climate policies

Modi was elected promising to revive India's economy. He sees the electrification of India as key to its economic development, and has made it a government priority to connect more than 300 million citizens to India's power grid.

As a consequence, India's electricity demand is likely to more than triple in the next thirty years, according to the International Energy Agency. That would mean India's energy-related emissions more than doubling by 2040, as this IEA projection shows:

Screen Shot 2014-11-25 at 09.51.41.png
Source: Data from IEA World Energy Outlook 2014. Graph by Carbon Brief.

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