Energy policy

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

  • 19 Dec 2014, 08:20
  • Mat Hope

  • 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

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

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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