British households will pay nearly 1 billion pounds to help guarantee the country’s electricity supply in 2018/19, after a government auction determined who will provide backup power capacity.
The auction, held by network operator National Grid, set the price to be paid to capacity holders at 19.40 pounds per kilowatt, giving plant operators clarity on how much their stations can earn in 2018/19.
British households will each have to fork out around 11 pounds that year to help pay the generators, the government said on Friday.
“We are guaranteeing security at the lowest cost for consumers. We’ve done this by ensuring that we get the best out of our existing power stations and unlocking new investment in flexible plant,” the secretary of state for energy, Ed Davey, said in a statement.
The capacity market is designed to ensure backup power is available when intermittent, renewable energy sources fail to generate.
Successful bidders will be paid the cleared price for keeping capacity on standby and receive a premium if their plants are needed.
Britain is setting a benchmark in Europe by introducing the capacity market, which large power producers such as Germany and France are now also considering.
Experts said the price was less than what many providers had expected.
“(The clearing price) is below the annual fixed costs of most existing plant on the system,” said Phil Grant, partner at energy advisory Baringa.
Some of Britain’s proposed new power plants missed out in the auction, putting their future in doubt.