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Renewables miss out on energy contracts

Renewable energy such as biomass and anaerobic digestion (AD) has missed out in the Government’s latest round of contracts, according to the industry.

The Department of Energy and Climate Change (DECC) has released its second Capacity Market Auction preliminary results, securing 46.354GW at a price of £18/kW.

Auction winners will receive capacity payments, which are a steady, predictable revenue stream that encourages them to invest in new generation or to keep existing generation available on the system.

FCC, Ferrybridge Multi-Fuel, Mercia, Suez and Veolia were all awarded contracts in this auction but the Renewable Energy Association (REA) said the £18/kW would be considered low and unviable for many green projects.

The REA said state investment in more expensive, polluting forms of energy have come at the expense of low-carbon baseload technologies and show a lack of understanding of the abilities of energy storage.

REA senior policy analyst, Frank Gordon said: “This year’s Capacity Market auction underlines the problems with the policy - that it does nothing to support the move away from higher carbon to clean energy, and it does not adequately consider value for money.

“Many renewable technologies can crucially provide the same ‘baseload’ capacity as fossil fuel generation, including biomass, AD, and energy-from-waste.

“If nothing can now be built in the UK without subsidy (nuclear, fossil fuels and renewables), then why not support the lowest carbon options?”

REA called on DECC to reform the capacity market to limit emissions from plant awarded contracts.

The Government ran a consultation on how to improve the capacity market, which closed on 10 December, and said it would reflect on the results of the first two auctions to check the framework still commands the confidence of industry.

Energy minister Andrea Leadsom said: “Our number one priority is to ensure that hardworking families and businesses have access to secure, affordable energy supplies they can rely on.

“This result represents a good deal for customers - fierce competition in the capacity market has driven down costs, meaning future capacity has been secured the lowest price possible.”

The auction monitor will report to the energy secretary on whether the correct procedure guidelines have been followed within two working days of the capacity market closing.

If they pass, National Grid will then make public the final auction results within eight working days of the auction concluding.

National Grid will then issue capacity agreement notices to those awarded a capacity agreement within 20 working days of the auction results day.

The capacity market is designed to deliver a supply of secure, sustainable and affordable electricity, by investing in new generation projects and innovative technologies while getting the best out of existing assets on the network.

The capacity obligation means they must be available to deliver energy when needed or face penalties.

The first capacity market auctions took place in December 2014 for the first year of delivery, which is 2018/19, and secured 49.26GW of capacity at a clearing price of £19.40kW.

Auctions will take place annually, four years ahead of the relevant delivery year.

 

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