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
- 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,
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
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
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.