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Britain’s Energy Madness: Coal Plants To Receive £130 Million Subsidies To Keep The Lights On

Emily Gosden, The Daily Telegraph

Britain will pay almost £130m in subsidies to keep dirty old coal plants running through the winter of 2020-21, after they proved a cheaper option for keeping the lights on than building big new gas plants.

The Government on Friday awarded £1.2bn of subsidy contracts through its capacity market auction to companies that could help ensure Britain has the power it needs in four years’ time at the lowest cost.

The subsidies, the lion’s share of which went to existing gas, coal and nuclear plants, will cost a typical household £14 on their energy bill in 2020. However, ministers estimate the scheme will also save households £12 in wholesale energy costs by avoiding price spikes that could have been seen if power supplies ran low.

The Government is keen to see new gas plants built as a cleaner replacement for old coal plants, which it wants to shut by 2025. It hailed the capacity market as a success after securing the construction of two mid-sized gas plants, as well as a raft of new battery storage projects.

But analysts at Barclays said they believed the auction “will largely be viewed as a disappointment by the UK government in terms of securing the significant levels of new gas generation capacity they hoped for”.

No new large-scale combined cycle gas turbine (CCGT) plants won, despite at least five such projects with a capacity of more than 1GW each competing. Analysts say such plants need a higher subsidy price to be commercially viable.

Instead, one of the new gas plants, the 299MW Spalding development, is an open cycle gas turbine project, a less efficient technology that can only run for limited hours each year.

The other, Centrica’s 370MW plant at King’s Lynn, will see a new combined cycle gas turbine installed in the infrastructure of a mothballed old gas plant, helping cut its costs compared with a wholly new project.

Dozens of small new gas reciprocating engines, which are also much less efficient than CCGT and only designed for occasional use, also won contracts.

In total the Government said 1.5GW of new gas generation won. However, this was dwarfed by the 5.7GW of ageing coal plants that secured subsidies.

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