Green Madness: Gas-Fired Power Plants Uneconomic
More than a dozen gas plants are awaiting construction but are uneconomic to build in the current market
Plans for a new generation of gas-fired power plants have been thrown into doubt after ministers warned that such projects may not be awarded crucial subsidies in an auction later this year.
More than a dozen gas plants are awaiting construction but are uneconomic to build in the current market. Developers have pinned their hopes on being awarded “retainer”-style payments under a new government subsidy scheme called the Capacity Market.
Ministers last week announced that they planned to recruit 53GW of power plants to the scheme through a reverse auction this autumn, to guarantee they would be available to keep the lights on in 2018-19.
The news was welcomed by developers including Carlton Power, which said it intended to bid its proposed 2GW plant near Manchester into the auction and have the plant running by 2018.
But in a statement, a spokesman for the Department of Energy and Climate Change (DECC) suggested such projects may not be awarded subsidies this year at all.
“We are clear that the vast majority — perhaps all — of the capacity winning the auction will be made up of existing plant and demand side response,” he said.
Demand side response involves energy users such as factories being paid to switch off at peak times.
He said the DECC was “not ruling out some new generation also clearing [winning]” but added that “whether or not any new capacity is brought forward will be determined by price alone”.
He said that if it was “cheaper to buy a new plant than to keep an old, run-down existing plant on the system, then that is what will happen”.
But industry experts said it is likely to be the older plants that are cheaper at this stage.