Gas and coal fired power have the majority win in the latest capacity market auctions

Further Capacity Market auctions took place last week for investment in securing electricity supply for future winter seasons in the UK. The Capacity Market auctions are part of the EMR scheme, in which companies will bid for funding for future capacity projects. In 2016, the auctions ended in a lot of funding given to battery and storage projects. This year reveals a different picture for securing future electricity supply and storage.

It’s been reported that 40% of funding this year has gone towards gas-fired power stations. The need for quick response supply has increased over recent years, and is expected to continue in the future. Therefore, a huge part of National Grid’s auction went in favour of these fast operating projects. This winter, clean spark spreads have been lower than dark spreads, further encouraging funding for these facilities.

However, Biomass plants and Coal power stations have also won a significant amount of bids. SSE in particular have managed to secure funding for Hydro electricity generation and pumped storage, along with coal and gas fired plants. Notably this winter, Fiddlers Ferry and Eggborough coal stations have been awarded funding to remain on standby should the power system become particularly tight. On more than one occasion this winter, the UK has been dependent on coal power, which has often generated 20% of UK supply at any one time. This all indicates to the reason why coal-fired power has made a sort of comeback.

Since the results have been published, many have concluded that awarding coal power station with funding from the Capacity Market auctions is a contradiction to the Government’s announcement last year to close all coal power stations in the UK by 2025:

Critics have highlighted the apparent contradiction between government plans to phase out all coal-fired power from the UK by 2025 and the provision of top-up payments — often described as subsidies — that help keep coal plants open.

The government says the capacity market system is designed to ensure that coal power is phased out gradually so that Britain avoids the risk of blackouts while making its transition towards cleaner forms of energy.

Meanwhile, others have suggested that the UK is still dependent on coal, due to the fact that wind and solar technology remains basic, leaving the UK with intermittent, unreliable and unpredictable power supply. Where wind is low and sun is scarce, the UK power system will struggle to meet demand.

Furthermore, many have pointed out that there are two auctions being held; one for future security of power supply for the 2020’s, and one for the security of power supply for upcoming years. While investing in aged coal and gas power stations may seem to refute the Government’s aims to become independent from fossil fuels, there is a phasing out period where CfD schemes and projects that will provide renewable power are yet to come into play. Therefore, power supply in the UK for the remainder of the decade could be well aided through coal and gas-fired power, to help keep the lights on, and to avoid blackouts.

 

 

 

 

Sources: Npower, EDF Energy, SSE, Financial Times, Engie, National Grid, the Guardian, Gazprom Energy