Fossil fuels favoured in electricity market reform, MPs find

4th March 2015

Related Topics

Related tags

  • Mitigation ,
  • Generation ,
  • Conventional


Linden Richardson

Energy costs and greenhouse-gas emissions could rise because a policy created to meet peaks in demand favours fossil fuel generating capacity rather than technology to reduce demand, a cross-party group of MPs has warn.

In its report on the government’s implementation of reform of the electricity market, the parliamentary energy and climate change (ECC) committee criticised the government for not creating a level-playing field in its new capacity market auctions.

They argue that more effective use of demand-side response (DSR) technology, such as back-up generators and energy efficiency measures, would reduce overall demand for electricity. If this was achieved only a small number of fossil fuel plants will need to be switched on a few times each year when there is a shortfall in capacity, say the MPs.

To avoid paying for carbon-intensive generation capacity that may not be needed in the future, the committee recommends that the government should consider increasing the length of DSR capacity agreements.

Tim Yeo MP, chair of the ECC committee, said: “Only a fraction of the £1 billion pounds that will be spent keeping the lights on through the capacity market will actually provide new capacity and just 0.4% will go on demand-side response – with most of the rest going to existing fossil fuel power stations, paying some of them to stand idle for much of the year.

“Nearly a fifth of the capacity contracts already awarded are going to highly polluting coal power stations,” he added.

Sara Bell, chief executive of Tempus Energy, a supplier of both energy and demand-management technology, welcomed the report. In December, the company submitted a legal challenge to the European General Court arguing that the state aid approval for the auction scheme was unlawful.

The ECC committee also criticised the way low-carbon investment is being implemented through the electricity market reforms.

The amount bill payers contribute towards low-carbon energy generation is capped by a mechanism called the levy control framework. Payments are awarded to energy generators through contracts for difference (CfD) following an auction.

The proportion of CfDs already allocated to “expensive” offshore wind farms may disadvantage cheaper renewable energy projects winning contracts in later years, the MPs warn.

Uncertainty over the total amount of money available through CfDs after 2021 may deter investors, the committee says. It wants the government to publish annual projections of the LCF to enable developers to make investment decisions.

Dr Nina Skorupska, chief executive of the Renewable Energy Association, said that the report echoed its fears that the capacity market and CfDs are pursuing competing aims.

“The capacity market is only designed to deliver one aim of government energy policy: capacity, whereas value for money and emissions are not a consideration.

“This is in contrast to renewables procured through CfDs, which can deliver significant extra low carbon capacity, with value for money as one of the scheme’s key aims,” she said.

Transform articles

National climate plans could see fossil fuel demand peak by 2025

Demand for fossil fuels will peak by 2025 if all national net-zero pledges are implemented in full and on time, the International Energy Agency (IEA) has forecast.

15th October 2021

Read more

The Green Homes Grant is set to deliver only a fraction of the jobs and improvements intended, leading to calls for more involvement from local authorities in future schemes.

23rd September 2021

Read more

COVID-19 recovery packages have largely focused on protecting, rather than transforming, existing industries, and have been a “lost opportunity” for speeding up the global energy transition.

23rd September 2021

Read more

Half of the world's 40 largest listed oil and gas companies will have to slash their production by at least 50% by the 2030s to align with the goals of the Paris Agreement, new analysis has found.

9th September 2021

Read more

None of England’s water and sewerage companies achieved all environmental expectations for the period 2015 to 2020, the Environment Agency has revealed. These targets included the reduction of total pollution incidents by at least one-third compared with 2012, and for incident self-reporting to be at least 75%.

30th July 2021

Read more

The UK’s pipeline for renewable energy projects could mitigate 90% of job losses caused by COVID-19 and help deliver the government’s ‘levelling up’ agenda. That is according to a recent report from consultancy EY-Parthenon, which outlines how the UK’s £108bn “visible pipeline” of investible renewable energy projects could create 625,000 jobs.

30th July 2021

Read more

Billions of people worldwide have been unable to access safe drinking water and sanitation in their homes during the COVID-19 pandemic, according to a progress report from the World Health Organisation focusing on the UN’s sixth Sustainable Development Goal (SDG 6) – to “ensure availability and sustainable management of water and sanitation for all by 2030”.

30th July 2021

Read more

The oil and gas industry is set to burn through its allocated carbon budget 13 years early unless decisive action is taken immediately, new analysis has found.

22nd July 2021

Read more

The UK will no longer use unabated coal to generate electricity from October 2024, one year earlier than originally planned, the Department for Business, Energy & Industrial Strategy has announced.

2nd July 2021

Read more

Media enquires

Looking for an expert to speak at an event or comment on an item in the news?

Find an expert