UK capacity market has failed to deliver flexibility, says think tank

via Tallbloke’s Talkshophttps://tallbloke.wordpress.com

The UK is struggling to get any reliable power generation built under its existing energy policies, as Utility Week explains. Meanwhile subsidies to renewables, and old coal-fired plants (as emergency back-up) roll on, making the future uncertain.

The capacity market has failed to deliver flexibility and reliable new-build generation, a new report by the Institute for Energy Economics and Financial Analysis (IEEFA) has argued. Existing generation should be exiled from the mechanism and support reserved for flexible new-build capacity, according to the think tank.

“While the goal of the capacity market was to drive investment in reliable new generation, the scheme—with £3.4 billion in awarded contracts to date—has yet to incentivise a single large new power plant,” the report said.

“This support for existing generation is distorting energy markets and has subsidized outdated investment, including more than £450 million for existing coal-fired power plants.” This was despite government intervention to increase the volume of new generation contracted by increasing the procurement target in the most recent four-year-ahead (T-4) auction.

“The enlarged T4 auction took place in December 2016, but achieved only a tiny increase in new generation as a proportion of the total contracted capacity, from four per cent to seven per cent,” the report said. It noted that the only new build combined-cycle gas turbine to secure a contract was a 370MW replanting of an existing power station in King’s Lynn.

The government should instead “repurpose” the capacity market and hold “smaller, targeted capacity auctions solely for flexible, new-build generation, including gas peakers, demand-side response and storage”.

The report continues here.