Comment on Capacity Market prequalification results

UK coal subsidies to top half a billion pounds

Friday’s announcement that six coal-fired power stations are looking to receive more government handouts in 2021/22 is expected to take the total subsidy paid to coal to more than half a billion pounds over the years 2017-2022. [1]

Capacity market auctions held since 2014 have agreed to pay more than £445 million to coal-burning power stations, in addition to revenue they earn from selling electricity. Should the 2018 T-4 capacity market auction settle at a similar price to those seen in recent years, the cumulative cost to the UK of keeping coal power stations online will be upwards of £650 million, or more than £8 per home. [2]

Commenting, Dr Jonathan Marshall, Energy Analyst at the Energy and Climate Intelligence Unit (ECIU) said: 

“Despite Theresa May and the UK Government announcing that the UK is leading the way on moving away from reliance on the oldest and most polluting generators, it continues to hand out hundreds of millions of pounds to support these otherwise uneconomic power stations.” [3]

The capacity market was introduced to ensure a secure electricity supply during the British winter. Auctions for capacity are held four years in advance of the delivery year, with a smaller auction one year prior to fine tune capacity procured. 2017 was the first year that plant operators received capacity market payments. A goal of the auction was to incentivise new gas capacity, which is significantly less polluting than coal; however, with old coal power stations clogging up the market, this aim is unlikely to be realised.

Catherine Mitchell, Professor of Energy Policy at Exeter University, said:   

“Continuing to subsidise coal seems like madness when the Government’s own stated intention, backed by all energy experts, is to move away from the dirtiest fuel. Propping up this outdated form of generation also stifles innovation and slows the transition to a smart, flexible energy system.

“The Government’s recent Clean Growth Strategy presents a vision of a Britain powered by low-carbon electricity, using the latest technologies like batteries for energy storage, demand-side measures and smart meters. It’s really difficult to see where coal fits into that mix.”

Having built its industrial revolution on coal power, the UK is rapidly moving towards cleaner sources of power. In 2016 coal contributed just 9% to annual electricity generation, less than generated by wind turbines. [4]

A ComRes survey for ECIU this year found that only about a fifth of people asked (19%) support paying subsidies for coal, compared to 85% who want renewable energy sources such as wind and solar to receive subsidies. [5]

ENDS

Notes to editors:

1.    Aberthaw, Cottam, Drax (units 4-6), Fiddler’s Ferry, Ratcliffe and West Burton A have prequalified for the 2017 T-4 capacity market, with a combined capacity of 11 GW. https://www.emrdeliverybody.com/cm/home.aspx

2.    The average closing price of the three T-4 auctions held to date is £19.99 per kilowatt of capacity. Household figure based on 27 million UK homes, which are responsible for approximately one third of total electricity expenditure.

3.    PM press conference with Canadian Prime Minister Justin Trudeau (18 Sep 2017): https://www.gov.uk/government/speeches/pm-press-conference-with-canadian-prime-minister-justin-trudeau-18-september

4.    UK wind generated more electricity than coal in 2016 (5 Jan 2017): https://www.carbonbrief.org/analysis-uk-wind-generated-more-electricity-coal-2016

5.    ECIU: 85% of Britons back subsidies for renewables (23 Feb 2017): http://eciu.net/press-releases/2017/85-of-britons-back-subsidies-for-renewables

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Image: Cottam power station by Richard Croft, reproduced under Creative Commons Licence