| Piston power Boom and bust?


The last ten years has seen a huge rise in arrays of small gas engines in GB. They have hollowed out plans for new large turbines – but now their own market could in turn be hollowed out by batteries


Janet Wood


When the UK held its annual capacity market (CM) auction in January 2022, for delivery in four years’ time (UK winter 2025/26), over 27 GW (27 632.389 MW) of gas-fired generation won contracts. That might be thought to represent perhaps ten large gas turbines, but in fact 221 units will provide that capacity and only two of them are large gas turbines in the hundreds of megawatt range. The overwhelming majority are not turbines, but small fleets of reciprocating engines that each bring just a few megawatts onto the grid. Over 200 of the gas contracts that were awarded in the auction – including 15-year contracts for new-build, three-year contracts for units undergoing major refurbishment or one-year contracts for operating plant – were for these engine arrays providing as little as 1 MW.


When it started a decade ago the UK capacity market was intended to bring forward large gas turbines, but the advent of small engine fleets has been a feature of the market since the first year, when 1.5 GW of such capacity won contracts. It was a development that took policymakers and the industry by surprise.


The market was designed in such a way that existing engines on industrial sites used for backup and peak lopping would become visible, with plants as small as 1 MW soon able to participate directly, signing contracts that gave them ‘availability’ payments over the winter months, in exchange for a guarantee to switch on in the event of a capacity crunch. From the first year specialist developers on cheap, small sites took advantage of the same opportunity. Investor interest was redoubled because of developments elsewhere in the market. At the same time the CM was being set up, rules changed in the GB balancing market that meant the cost of balancing actions fell more sharply on the participants that were ‘out of balance’ in each half hour – and enabled the most flexible participants, who could increase generation fastest, an opportunity to make big returns from the short term price spikes. The combination of a capacity market contract to support fixed costs, low-risk entry to the market (see below) and short but lucrative operating periods proved attractive for a wide variety of investors, many of whom were new to the electricity sector.


In the first auctions the UK capacity market was criticised because contracts went to so-called ‘dirty diesel’ plants – both new and industrial backups. But rule changes that tightened emissions regulations meant it took just a few years for investor interest to move to gas reciprocating engines. That is now the standard technology for such installations: over 400 such projects entered the prequalification process, over 300 entered the auction and 82 won contracts in the 2017 capacity market auction, for the upcoming ‘delivery winter’ (2022/23). Why are these engines so popular? The fact that some are sized at 49.9 MW gives one clue: the GB’s electrical plant permitting system is much simpler and much faster for small energy projects, sized below 50 MW. But planning permission is also easier to come by because large dedicated sites are not needed (the recips are sometimes referred to as ‘car park plants’). The installations connect to the local gas and electricity distribution networks; although some require new connections, developers look for sites already served by gas and electricity links – especially ex-industrial or commercial sites (dubbed ‘brown


Above: 21 MW gas engine array at Ashford, UK, 21 MW, employing Jenbacher machines (photo: Clarke Energy) www.modernpowersystems.com | June 2022 | 13


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