Full results were released on Friday of the Capacity Market Auction, a mechanism through which the government procures electricity generation capacity aimed at shoring up energy security. The government’s Department of Energy and Climate Change (DECC) said today that it had procured 46.354GW of capacity at a price of £18 per kW aimed at providing energy security in the years 2019 and 2020.
While auction results are at the moment provisional and will be officially confirmed on 22 December, it appears the majority of awards have gone to combined cycle gas turbine plants, with coal and nuclear also forming significant portions of the total.
The REA said the auctions represented a “continued subsidisation of polluting energy forms”, calling it “state investment in more expensive, polluting forms of energy at the expense of low-carbon baseload technologies”. The REA was also scathing in the treatment of energy storage, with no new-build storage technologies awarded capacity contracts.
The UK government has spent several million pounds on various trials of energy storage applications at small to large scale. Despite this and the fact that current energy minister Amber Rudd has repeatedly said energy storage is a technology with a great deal of promise.
At an event in early January of this year, Prof Jonathan Radcliffe of the University of Birmingham expressed concerns directly to Rudd that the UK could fall behind in a fast-growing, high value global industry. Deploying storage in the UK, Radcliffe later told PV Tech Storage, would be a good way to ensure scaling up of industries and progress in innovation.
As with the first capacity market auction, it appears that the benchmark price set per kilowatt was too low to justify capital investment in new energy storage projects. This made it far easier for existing nuclear and fossil fuel generators to offer ‘spare’ capacity into the auction at a much lower marginal cost.
The only positive REA appears to have taken from the latest process is the high amount of capacity procured from demand response providers – around 450MW.
A missed opportunity
The break down of the results reveals that the majority of successful plants were existing and mainly comprising of CCGT and nuclear. Just 74 new build generators were successful, representing just 2GW – equivalent to 4% - of capacity market obligations.
Electricity Storage Network’s Jill Cainey said that this was unsurprising given the difficulties in identifying financing opportunities at last year’s clearing price and the fact that existing plants come with none of the associated investment risk. Cainey noted that as the 5GW of new build dropped out of the auction as the price dipped, this has meant that the auction has failed to deliver the new gas plants required to fulfil Rudd’s new energy strategy outlined in November.
This is likely to reverberate with the only new build projects to stand a chance of securing capacity being carbon intensive diesel generators. Despite reports suggesting that around 650MW of diesel will be procured at a cost of £175 million, Cainey said it was difficult to assess the wider impact. “It is very difficult determine how much of the capacity will be supplied by high carbon plant, and difficult to determine how much of the capacity will be provided by diesel generators,” she said.
Cainey was also particularly dismissive of the mechanism’s design. “The design of the capacity market is not supportive of new technologies such as electricity storage where continuous delivery is required to hopefully cover a stress event, that is determined after the event. So the current approach is missed opportunity to bring new electricity storage on to the GB system, where it could be supporting security and significantly lowering carbon emissions,” she said.
Second time unlucky
The capacity market auction was held for the first time at the end of 2014, with results announced at the beginning of this year.
In an interview with PV Tech Storage in 2014 ahead of the first auction, Ed Davey, the UK’s most senior minister for energy at the time in his role of secretary of state for climate change, said that energy storage could benefit from 2015’s capacity market auctions as well as from targeted R&D spending at government level.
However, when it emerged that a price of £19.40 per kilowatt, as with the most recent results, would be too low to engender any investment in new energy storage facilities with only the capacity increase for an existing pumped hydro plant given the ok for storage, commenters in the UK were quick to highlight the failings of the mechanism.
The news comes just a few days after UK prime minister David Cameron made a speech at the COP21 climate change conference in Paris, where he extolled the virtues of a low carbon economy. Cameron famously went on a “fact-finding mission” to the Arctic before he was elected, while making pledges to create the “greenest government ever”.
However it has not all gone smoothly, with accusations of politically motivated attacks on renewable energy levelled at the premier and his leading energy minister Amber Rudd combining with an overspend on the Levy Control Framework, the mechanism controlling the cost of Britain’s energy policies. Now in his second term, it seems likely the government will also give the green light to massive cuts in support for renewables, including and almost 90% cut to the residential solar feed-in tariff (FiT).
Solar Power Portal, the website dedicated to UK solar and related technologies, this week ran a blog on the gap between Cameron and Rudd’s climate change rhetoric in public and the reality of the impact of their policies.
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