Plans to keep the lights on without relying on dirty diesel generation were announced by the government yesterday as it brought forward payments to energy companies for committing to supply power.
The energy department said that changes to the system would encourage the development of new gas-fired power plants, the lack of which has been one of the key criticisms of the capacity market auction introduced in January last year.
Under the rejigged system, more electricity generation will be bought at an earlier stage in the hope that new gas power stations will compensate for the retirement of coal-burning sites. Several plants have closed in recent months and the government plans to phase out the fuel entirely by 2025.
The scheme will also be brought forward another year so that an auction will be held next January for commitments to generate electricity in 2017-18.
The safety buffer is set to be tighter than ever next winter after a flurry of coal power station closures, including Ferrybridge in West Yorkshire and Longannet in Fife. In November, National Grid resorted to emergency measures — paying big users to go off the grid — after low wind and unexpected outages at coal plants left the country close to not generating enough electricity.
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The moves, which were announced by Amber Rudd, the energy secretary, also sought to respond to criticism that the auction in its original form subsidised diesel generation. the energy department said that Ofgem, the regulator, was looking at the in-built advantages that diesel generation enjoys under the scheme, including its exemption from “transmission network charges” paid to National Grid. Meanwhile, the environment department is examining the introduction of emission limits on diesel engines.
Utility executives have said that the capacity auction had set a price for supply that was too low to encourage the new gas generation that Britain needs to avoid blackouts.
As well as diesel generation, there were complaints that interconnected generation from overseas had an unfair advantage because it was not subject to the same green taxes as energy from domestic sources.
The industry welcomed the new measures, but Ms Rudd was accused of a “panicked response” by Lisa Nandy, her Labour counterpart.
Vincent de Rivaz, the chief executive of EDF Energy, said: “The government’s proposed reforms to the capacity market represent an important step to ensure the UK continues to have a secure and affordable supply of electricity.”
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A spokesman for Energy UK said: “With the phasing out of coal, the capacity market is the right mechanism to bring forward new investment to ensure customers have electricity any time they need it . . . Long-term policy on charging arrangements and air pollution limits will increase the competitiveness of the market.”
Ms Rudd said: “The capacity market has driven down costs and secured energy at the lowest possible price for billpayers, but I’m taking further action to tackle the legacy of underinvestment and ensure our country’s long-term energy security.”