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UK Needs Gas Stations

Tuesday, December 15, 2015

GMB Call For Energy Capacity Market Auction To Be Replaced With System That Procures New Power Stations The UK Needs

Auction has led to bizarre outcome of dozens of new dirty diesel generators to be built with £175m subsidies while not giving any contract to eight cleaner gas turbine plants says GMB.

GMB, the union for engineering construction and energy workers, call on the UK Government to scrap the energy capacity market auction and replace it with a system that will procure the new power stations that the UK needs.

The second auction, announced on 11th December, has led to consumers being required to fund the building of dozens of new highly polluting diesel generators in the UK while rejecting eight cleaner combined-cycle gas turbine (CCGT) plants. See notes to editors for copy of DECC press release and report in Daily Telegraph dated 11th December.

The details of the proposed eight cleaner combined-cycle gas turbine plants in Kent, Essex, Suffolk, Norfolk, South Wales, Lincolnshire, South Yorkshire and Derbyshire that were in the auction but did not get a contract are as follows:

Plant

Owner

Capacity (MW)

Location

Damhead Creek 2

Scottish Power

1139

Rochester ME39TX

Gateway Energy Centre

InterGen

1096

Essex SS17 9LP

Spalding Energy Expansion

InterGen

905

Lincolnshire

Thorpe Marsh A

Carlton Power

570

Doncaster

Powersite (2 units)

Powersite Ltd

338

Drakelow, Derbyshire

Kings Lynn A

Centrica

329

Kings Lynn

Hirwaun

Watt Power

283

Rhondda

Progress

Watt Power

283

Suffolk

Phil Whitehurst, GMB National Officer for Engineering Construction, said “The auction has led to the bizarre outcome of dozens of new dirty diesel generators to be built with £175m subsidies while not giving any contract to eight cleaner combined-cycle gas turbine plants.

How ridiculous is the outcome that has left the UK now dependant on polluting diesel generator for our energy security.

The whole process should be scrapped and a more viable process put in place to supply the UK with a sustainable medium to long term generation policy until the new fleet of nuclear stations are up and running. Combined cycle gas turbine power stations should be playing a part in that process.

The “reserve auction” should be renamed the "reverse auction" because that's what it's turned out to be. It has reversed the flow of investment in our ailing power generation infrastructure new build, choking out the much needed investment and much needed work in the Engineering Construction Industry.

The massive construction company CB&i Shaw UK are getting ready to announce their departure from the UK construction market because this Government are not encouraging tendering on a level playing field, It favours overseas investors who undercut UK labour standards by exploiting migrant workers to bolster their profits. The capacity auction has gone down the same route with a race to the bottom for the cheapest and the nastiest when it comes to diesel generation.”  

End

Contact: Phil Whitehurst 07968 338810 or GMB 020 7391 6700 or GMB press office 07921 289880 or 07974 251 823.

Notes to editors

1 Copy of DECC press release dated 11th December 2015

Securing future electricity supply

From: Department of Energy & Climate Change

The second Capacity Market auction has successfully concluded, securing capacity for 2019/20. The auction attracted enough bidders to secure the capacity needed at a competitive price for consumers - 46.354GW at a price of £18/kW.

The second Capacity Market auction has successfully concluded, securing electricity generating capacity for 2019/20. The auction attracted enough bidders to secure the capacity needed at a competitive price for consumers. The amount secured - enough to provide almost all the capacity we need - cleared at a price of £18/kW, over £1 cheaper than last year. Buying capacity four years ahead of the delivery year maximises the range of participants that can compete in the auction, thereby promoting competition.

Energy Minister Andrea Leadsom said:

“Our number one priority is to ensure that hardworking families and businesses have access to secure, affordable energy supplies they can rely on.

“This result represents a good deal for customers - fierce competition in the Capacity Market has driven down costs, meaning future capacity has been secured the lowest price possible.”

Notes to Editors

·    The auction secured 46.354GW at a price of £18/kW.

·    Within 2 working days of the Capacity Market closing, the Auction Monitor must report to the Secretary of State on whether the procedures in the Rules and Action Guidelines have been properly followed.

·    The Secretary of State decides whether the auction results should stand based on the Auction Monitor’s report. Unless instructed otherwise by the Secretary of State, National Grid will then make public the Final Auction Results within eight working days of the Capacity Auction concluding.

·    National Grid will then issue capacity agreement notices to those awarded a Capacity agreement within 20 working days of the auction results day.

·    The government has already consulted on how to improve the Capacity Market (the consultation closed on 10 December), and after this year’s auction will reflect on the results of the first two auctions to check the framework still commands the confidence of industry and investors to deliver world class energy security and investment in new capacity.

2 Copy of report in Daily Telegraph dated 11th December 2015.

Dozens of new 'dirty' diesel generators to be built with £175m subsidies

Government scheme awards subsidies for the construction of 650 megawatts of new, highly-polluting diesel generators to help keep the lights on

By Emily Gosden 2:01PM GMT 11 Dec 2015

Dozens of new highly polluting diesel generators are to be built in the UK after being handed consumer-funded subsidies worth £175m over 15 years.

Companies proposing to build 650 megawatts of new small diesel engines won subsidies through the latest round of the Government's capacity market scheme, which is designed to ensure there are enough power plants to keep the lights on in 2019-20.

The scheme was originally intended to deliver big new efficient combined-cycle gas turbine (CCGT) plants to replace old polluting coal-fired power stations, but has so far failed to do so.

Subsidies are awarded through a reverse auction to whichever companies can offer to provide capacity for the lowest possible price.

Five proposed big new CCGT plants with a combined capacity of 4GW entered the auction, according to analysis by Cornwall Energy, but withdrew as the subsidy on offer fell to £18 per kilowatt - too low to be economically viable.

Instead, the capacity market, which will pay out more than £830m in consumer-funded subsidies in 2019-20, has primarily benefited existing gas, coal and nuclear plants - as well as sparking an unintended new industry constructing diesel plants.

The #CapacityMarket Clearing Price is £18.00/kW, the total quantity of De-Rated Capacity is 46353.569 MW.

— EMR Delivery Body (@EMRDeliveryBody) December 10, 2015

In addition, dozens of small, inefficient open-cycle gas generators have also been awarded subsidies.

Andrea Leadsom, the energy minister, insisted the result of the auction was to be welcomed.

"Our number-one priority is to ensure that hardworking families and businesses have access to secure, affordable energy supplies they can rely on," she said.

"This result represents a good deal for customers - fierce competition in the capacity market has driven down costs, meaning future capacity has been secured the lowest price possible."

But ministers are already consulting on changing the rules of the scheme, and Amber Rudd, the energy secretary, has said the Government will consider the future of the market in light of the results of this auction,

In a statement, the Department of Energy and Climate Change confirmed it would "reflect on the results of the first two auctions to check the framework still commands the confidence of industry and investors to deliver world-class energy security and investment in new capacity".

Ministers have already proposed rule changes to try to ensure that companies that win contracts to build new plants actually deliver them, after the Telegraph revealed that the only big new CCGT to win a subsidy contract in last year's auction admitted it could not find investors.

Ed Davey, the former energy secretary who oversaw the creation of the scheme, has said it was never intended to encourage new diesel generators but that EU rules prevented the Government excluding certain kinds of plants.

Dave Jones, policy analyst at environmental campaign group Sandbag, said: "The capacity mechanism is having the perverse effect of slowing the modernisation and decarbonisation the UK electricity system.

"The capacity mechanism has failed to attract any new efficient gas plant or interconnectors, and it is paying coal to stay open longer than it would have otherwise, despite a government pledge to phase out coal generation.

"Also, a tax loophole – the Enterprise Investment Scheme – is funding super-profitable new diesel plants to be built, which evade carbon pricing and strict emissions limits, and although are cheap to build, are expensive and polluting to run."

He said the Government should investigate "how the capacity mechanism has become such a shambles".

Dan Roberts, director of energy at Frontier Economics, said: "The auction delivered a low price, but that doesn’t mean it’s a success.

"It is becoming obvious that small generators – diesel and gas – are securing an unfair competitive advantage over more efficient generators like new CCGT plant, and maybe even existing plant. There isn’t a level playing field, and that is costing customers money.

"DECC and Ofgem will need to sort the problem out before the next auction."

Lisa Nandy, the shadow energy secretary, said: "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."

 

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