GENSETS


Capacity Market Subsidy Scheme boosts diesel generators


In order to ensure the UK has enough reserve power capacity, the government’s capacity market subsidy scheme currently favours onsite power installations featuring diesel gensets. Around 246 proposed new projects ­ with a combined capacity of 4 GW ­ are likely to qualify for the subsidy of up to £800m over 15 years.


available to generate when needed in future winters. The new diesel generators have been able


U


to undercut the big, efficient, new gas-fired power stations that ministers hoped the scheme would support. Commenting on the National Grid Winter Outlook Report 2016/17 Dr Jonathan Marshall, Energy Analyst at the Energy and Climate Intelligence Unit (ECIU) said: “The strong message to take from this report by National Grid is that, despite the ongoing closure of coal-fired power stations, the risk of blackouts this winter is similar to last year, when the system continued as normal. That risk will fall still lower after this winter


with the advent of guaranteed available gen- eration under the Capacity Market, and this will also reduce costs because capacity is being procured in a more predictable and


nder the capacity market, owners of existing or proposed new plants compete to secure subsidies in return for guaranteeing they will be


strategic fashion. About 2 GW of new battery storage capacity also qualified to take part in this year’s capacity market, but Dr Marshall said this was ‘likely to be undercut by low-cost diesel’. He points out: “If there’s a missing piece in


this jigsaw, it’s arguably the unexploited potential of demand side response, measures that enable customers to actively reduce electricity demand at peak times, thereby cutting the amount of generation capacity that we need. He concludes: “Demand side response is


relatively cheap, flexible and can be brought on stream quickly, so it would make sense for the Government to allow it to compete on equal footing with supply-side measures.” Dr Marshall joined the Energy and Climate Intelligence Unit from Platts, where he was responsible for analysing and reporting on European gas and electricity markets. Prior to this he was a researcher at Imperial College London, developing new materials for low- cost solar cells. He holds a Ph.D.


“In the


UK..we are moving


towards a


decentralised flexible grid


with a diverse mix of


generation


capacity, and increasingly smart


methods of balancing


supply and demand.”


­ Hugo


Chandler, Director at New


Resource Partners


32


in Chemistry from Imperial College London and completed his undergraduate studies at the University of York. Most recently he has argued that the raft of new diesel plants entering the capacity market would likely result in a low price but that ‘questions have to be asked over the sustainability of offering long-term contracts to highly-polluting diesel generators’. Hugo Chandler, Director at New Resource


Partners, said: “Blackouts and supply crunch- es make good copy, but the boring truth is that we are not seeing them. And I think it’s about time that we recognised that things have changed. In the UK, as in other advanced economies, the old model of centralised electricity generation focused on building big power stations is rather outdated. “We are moving towards a decentralised, flexible grid with a diverse mix of generation capacity, and increasingly smart methods of balancing supply and demand. One big fea- ture of this - as in any other functioning market - will be consumers actually responding to supply prices. Understanding the barriers to this transition and ensuring we manage it in the most cost-effective way possible should be our focus now.” A spokesman for the Department of


Business, Energy and Industrial Strategy said: “Diesel generation accounts for less than 0.1% of total energy generation and will only ever be used for very short periods of time to provide instant electricity when it is needed. We are taking action on diesel emissions and all new diesel systems will have to comply with new emission controls.’ Dr Marshall concludes: "National Grid's assessment of the supply-demand gap for the coming winter tends to presage a blooming of ‘Blackout Britain’ headlines. The UK’s energy system is in transition, following the path of other industrialised nations to a flexible grid with renewables at its heart. “Demand is falling as energy efficiency improves, while ageing, inefficient coal-fired power stations are closing. The transition has been in train for at least a decade, and so have warnings that the lights were about to go out. But still 'Project Blackout Fear' has failed to burst into darkness, with more than suffi- cient measures in place even as renewables provide a quarter of our electricity, evidenced by the lack of a generation-driven outage in more than a decade.”


AUTUMN 2016 UK POWER NEWS


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