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Pollution fears as £150m subsidy is poured into back-up diesel power £175m subsidy for back-up diesel and coal power prompts calls for inquiry
(about 4 hours later)
New heavy-polluting “diesel farms” will be built with more than £150m worth of subsidies under a “capacity market” auction run for the government aimed at keeping the lights on. The government is facing calls for an urgent investigation into how companies were awarded more than £175m in subsidies to build heavily polluting “diesel farms” to provide the UK with backup energy generating capacity.
The National Grid confirmed on Friday morning that it had ended the auction having secured the 45 gigawatts (GW) of back-up power generation it wants for peak periods starting in 2019 at a price of £18 per kilowatt year, slightly lower than during the first auction last year. Critics said an energy generation auction overseen by the National Grid had descended into a farce by rewarding intensive carbon dioxide (CO2) emitters, just as ministers committed Britain to lower carbon emissions at UN climate change talks in Paris.
The government has been heavily criticised for allowing the involvement of diesel farms – and coal stations – at a time when ministers are in Paris promising to lower CO2 emissions as part of a new climate change treaty. The Grid confirmed on Friday morning that it had secured the 45 gigawatts (GW) of back-up power generation it wants to meet peak periods of electricity demand starting in 2019. Bidders of gas, nuclear and diesel-fired plants agreed a price of £18 per kilowatt-year (8,760 kilowatt hours), slightly lower than achieved during the first auction last year.
The Grid published details showing energy companies had won contracts to build 575MW of new diesel-driven capacity at a price of about £155m, according to Sandbag, which campaigns to reduce CO2 emissions. The Grid published details on Friday showing energy companies had won contracts to build 650MW of new diesel-driven capacity at a cost of about £175m.
Gas-fired power stations had won half of the contracts but no energy companies had put forward plans to build new gas facilities as the government hoped. The cost was estimated by Sandbag, an organisation which campaigns to reduce CO2 emissions. “The UK’s [power auction] is a complete shambles. We’re spending money on all the wrong things and as a result the right things are not happening,” said Bryony Worthington, a Labour life peer and Sandbag founder.
There are also contracts for an unspecified number of coal-fired power stations, despite promises from the government that they would be phased out as too polluting. “There should be an urgent investigation into why it’s gone so badly wrong with reforms introduced in the energy bill, which will arrive in the Commons in January.”
Related: Heavily polluting 'diesel farms' to make millions from subsidies, IPPR warnsRelated: Heavily polluting 'diesel farms' to make millions from subsidies, IPPR warns
The Renewable Energy Association, a lobby group, supported the call, saying firms offering storage and other greener technological solutions were losing out. Frank Gordon, senior policy analyst at the REA, said: “This year’s capacity market auction underlines the problems with the policy – that it does nothing to support the move away from higher carbon to clean energy, and it does not adequately consider value for money.”
Gas-fired power stations won half of the contracts on offer but no energy companies put forward plans to build new gas facilities as the government had hoped.
There were also deals for an unspecified number of coal-fired power stations, despite promises from the government that coal would be phased out as too polluting at the start of the next decade.
Amber Rudd, the energy secretary, has promised to reform the auction scheme but one of her ministers, Andrea Leadsom, welcomed this year’s awards, arguing they reduced costs for homeowners. “This result represents a good deal for [energy] customers. Fierce competition in the capacity market has driven down costs, meaning future capacity has been secured at the lowest price possible.”
However, Lisa Nandy, the shadow energy secretary, said the government needed to go back to the drawing board. “This policy has failed in its purpose of attracting investment in new power stations. Instead hundreds of millions of pounds will be paid out to big energy companies to keep open old power stations that would have been open anyway, and to diesel farmers to use ultra-polluting generators, and it is families and businesses who will pick up the tab through their energy bills.”
Dustin Benton, head of energy and resources at the Green Alliance thinktank, said: “Amber Rudd deserves praise for deciding to phase out coal, and it’s now clear that she needs to reform our outdated capacity market.Dustin Benton, head of energy and resources at the Green Alliance thinktank, said: “Amber Rudd deserves praise for deciding to phase out coal, and it’s now clear that she needs to reform our outdated capacity market.
“Continuing to give hundreds of millions of pounds to coal is perverse and unnecessary. The UK can keep the lights on without coal if we get rid of the capacity market’s bias against demand response and push ahead with new energy efficiency policy.”“Continuing to give hundreds of millions of pounds to coal is perverse and unnecessary. The UK can keep the lights on without coal if we get rid of the capacity market’s bias against demand response and push ahead with new energy efficiency policy.”