Power firms to get £1bn for plants to stay open

lstar337

Power generation firms are to receive close to £1bn to ensure their plants stay open and prevent the lights going out in the coming years.

In the government's first capacity market auction more than 49GW of power capacity has been secured at a cost of £19.40 per KW.

That amounts to a total cost of £960m and will add around £11 to the average household energy bill.

The auction will provide power for the year 2018/19.

http://www.bbc.co.uk/news/business-30545091

System

To put that into context, my little PV solar installation generated 1900 kWs last year which paid me £950 in FIT payments. Has the Govt really agreed to pay the power generators £36,860 for a similar amount of energy? Someone please tell me that I am wrong. And the Government claims that this is good value for money for the taxpayer.

stator

Hengus wrote: »

To put that into context, my little PV solar installation generated 1900 kWs last year which paid me £950 in FIT payments. Has the Govt really agreed to pay the power generators £36,860 for a similar amount of energy? Someone please tell me that I am wrong. And the Government claims that this is good value for money for the taxpayer.

No.
They are paying the power companies a subsidy for capacity, not generation. You are being paid per kwh, h meaning hour, power produced for an hour. They are paying the generators per kw of capacity, ie potential generation, regardless of whether it's generated or not.

This is similar to the situation in Germany where the massive increase in renewables being subsidised has lead to coal and gas power plants being used sporadically. The plants can't cover their costs or make a profit so they shut down. So when the renewables aren't meeting the needs of the grid you end up with black outs. To stop this the government are now subsidising reliable generation capacity, whether they generate or not.

It's another reason why renewables are so unaffordable.
It would be cheaper and greener to just build nuclear

[Deleted User]

" government are now subsidising reliable generation capacity"

No if you read the source, you will find that the average electricity bill will rise by £11 per annum to meet the cost. So the consumer pays for it in their bills.

And if we all cut our electric usage, the percent rise will be greater as we have to pay for this fixed amount regardless.

ChumpusRex

It's not a subsidy, as electricity customers will pay for it.

It is a new feature of the electricity market (between generators and suppliers) which at present does not recognise a difference between reliable and unreliable, and does not provide a mechanism for a power station to charge a fee for being in "standby" mode ready to produce if needed.

With more wind power coming online, normal power stations are selling less electricity, and more importantly having to supply in shorter bursts. Some are now shutting down, permanently because they cannot bring enough money in to keep their equipment serviced and in working order. This in turn is creating a risk that there won't be enough power stations available to keep the lights on if the wind stops blowing.

This auction is the introduction of a new system which allows power stations to compete for "capacity" - keeping their plants in working order, ready to generate power in response to a power shortage.

stator

Yes, we pay for it, as we always do. Another stealth tax really

ChumpusRex

stator wrote: »

Yes, we pay for it, as we always do. Another stealth tax really

Not so much a stealth "tax" as a "hidden cost" of wind power.

Upgrading the electricity grid to take power from the wind farms in the middle of nowhere to where people live is adding about £50 per year to bills over the next decade or so. That's another "hidden" cost of wind power that everyone will pay.

And we are already paying through the nose for offshore wind - the government is giving a guaranteed price of £155/MWh for wind already. They had planned to reduce it over the next few years, but are currently reconsidering, after a number of big wind farm investors said they would pull out if there was any reduction in the guaranteed price.

System

I think that I need to lie down. When will the political parties come up with some desperately needed joined up thinking? Sadly, they wouldn't be able to agree who to credit if things went well, or who to blame if things went badly. At least I will be able to phone my MP from 90% of the UK. Oops, I forgot that's £5Bn of additional cost on mobile phone bills.