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Davey Needs 53GW Of Spare Power Station Capacity For When Renewables Don’t Work

July 1, 2014

By Paul Homewood

 

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http://www.telegraph.co.uk/finance/newsbysector/energy/10936948/Consumer-energy-bills-to-rise-to-keep-power-plants-open.html

 

The Telegraph report:

 

Consumer energy bills will rise in order to pay retainers to dozens of power stations to guarantee they are available to keep the lights on, ministers have announced.

Under a so-called “capacity market”, ministers plan to recruit more than 53GW of power stations – enough to meet 80 per cent of Britain’s peak demand – to ensure they can fire up when needed.

Households will each pay an average of £13 a year to the power plants, to guarantee they are ready on the system from 2018-19.

The Government has previously described the system, which will be paid for through levies on household bills as an “insurance premium against the risk of blackouts”. It hopes the scheme will keep existing gas and coal power plants from mothballing and encourage the construction of dozens of new gas plants by helping to guarantee their profitability.

Building new gas plants is otherwise unattractive, because as Britain builds more wind farms, gas plants may only run for short periods of time when the wind isn’t blowing.

Ed Davey, the energy secretary, said that the policy would add £2 to consumer bills.

However, the Department of Energy and Climate Change later clarified that the £2 impact was compared with a future scenario in which there was no capacity market, rather than compared with today’s prices.

DECC said it forecast that the new capacity market would cost consumers about £13. However, it also predicts that it will also save consumers about £11 by preventing future power price spikes that would otherwise occur in the event of shortages, giving the net forecast impact of £2.

DECC had previously estimated that the policy would have a net impact of £13-£14 to bills, again compared with a future scenario with price spikes and blackouts. It has since significantly changed its modelling, predicting far more severe price spikes in the absence of the policy, resulting in the £2 net impact.

Mr Davey said: "There was a real risk back in 2010 that an energy crunch would hit Britain in the middle of this decade and lead to damaging power cuts.

"But the excellent news is that with [this] announcement we have the final piece of the jigsaw of our detailed energy security plans and can now say with confidence that we have defused the ticking time bomb of electricity supply risks we inherited."

Analyst Peter Atherton at Liberum Capital said that total payments to energy companies under the scheme could be in the region of £1.6bn, implying payments of at least £20 per household.

 

 

There is not a lot new here, as plans for a Capacity Market were announced last year. The new development is that DECC have identified the amount of capacity it wished to procure, as they state in their Press Release.

This figure of 53GW is phenomenally high, representing as it does 80% of peak demand. It really does go to show just how intermittent and unreliable renewable energy is.

Someone with a bit of common sense might suggest that we just use this capacity all of the time, and shut down the unreliable stuff.

 

As for the cost, quite simply nobody knows yet, as the next stage is go into an auction with the energy companies. However, you have to laugh, (or cry), at Davey’s logic, when he claims the cost will be £2. He gets to this by assuming that his own policies will, otherwise, cost consumers money because of blackouts!

Liberium’s estimate is slightly higher at £20 per household, but it needs to be remembered that this assumes about two thirds of the cost will be paid by non-domestic users. Given that, ultimately, households will end up paying for these higher costs, whether through higher prices, lost jobs or higher taxes, the true cost per household is :

 

£1.6bn Divided By 26 million Households = £62 pa.

I trust you are all grateful for this.

15 Comments
  1. bit chilly permalink
    July 1, 2014 12:30 pm

    ed davey has to be the most incompetent blithering idiot ever to sit in parliament .it begs a question of the constituency members that voted for him.
    makes it quite east to understand the growing tide of distaste for the liberals in the uk.

  2. mkelly permalink
    July 1, 2014 12:45 pm

    All of this is unnecessary. Scheme is the correct word.

    • catweazle666 permalink
      July 2, 2014 3:14 pm

      I think you mean scam.

  3. winter37 permalink
    July 1, 2014 12:48 pm

    More Govt. insanity.More useless windmills=more gas import dependency=more cost to consumers,and more likelihood of blackouts.
    The solution is of course to build more coal fired power stations,using home produced coal,as coal is the cheapest ,and cleanest fuel available at this time.
    By the way,Carbon Dioxide is only plant food,so we can assist crop yields world wide,and help to alleviate starvation amongst those that are suffering.

  4. A C Osborn permalink
    July 1, 2014 1:13 pm

    Paul, what you mean like today, Wind is producing a mighty 0.12Gw or 0.33% of the required Energy.
    The lunatics are definitely running this asylum.

  5. Paul permalink
    July 1, 2014 1:17 pm

    Even though they tell the Irish that at times 50% of their electric comes from wind the facts speak differently:

    http://www.eirgrid.com/operations/systemperformancedata/windgeneration/

    No better over here with the UK national grid status stuck below 1% and thereabouts for the past few weeks. In fact it’s reading 0.33% as I write.

  6. Paul permalink
    July 1, 2014 1:18 pm

    A C Osborn –

    Snap!

    • A C Osborn permalink
      July 1, 2014 2:29 pm

      I beat you by 4 minutes LOL.

  7. Herve permalink
    July 1, 2014 2:46 pm

    £2billion is pure propaganda ! This is less than one tenth of the annual electricity output for which these power plants have been designed for. It would even not cover employees salaries, let alone maintenance, taxes and so on…
    This is pure leftist desinformation.
    These governmental leftist would deserve less public disdain shall they be honest and recognize that their ideology is driving UK in an economic black hole…

    • July 1, 2014 3:00 pm

      Yes, I’ve just been working it out.

      £1.6bn comes to about £15 million a year for a 500MW power station. I can’t see many going for this.

  8. drnobby permalink
    July 1, 2014 6:08 pm

    OK, we have paid carbon taxes, the Climate Change Levy and other rather creative revenue raising taxes to support the green shoots and continuing growth of the renewable energy industry, only now to be told because they don’t work all the time (not that anyone was aware of this you see ;-), and absolutely no-one mentioned they wouldn’t work all the time before now…) we have to pay some more to retain the services of energy suppliers that can actually power the country when the renewables have run out?
    Is that about it or have I missed something?

    • drnobby permalink
      July 1, 2014 6:18 pm

      In fact, now I think about it a little more, would we not just be paying the energy suppliers to hang on to the spare capacity that has built up in the system as a result of allowing renewable energy in to the system? So, how many times are we being made to pay for the same product?
      I really might be missing something here…

  9. Joe Public permalink
    July 1, 2014 7:25 pm

    Two points Paul:

    1. I notice the Torygraph’s Picture Editor is emulating the BBC diktat of utilising photos of backlit water vapour from cooling towers to imply pollution to its uninitiated readers.

    2. ” Given that, ultimately, households will end up paying for these higher costs, whether through higher prices, lost jobs or higher taxes, the true cost per household is :
    £1.6bn Divided By 26 million Households = £62 pa.”

    But let’s be generous and assume we manage to export goods that used 10% of that energy, so the net cost to each household ~ £56.

  10. manicbeancounter permalink
    July 2, 2014 7:18 pm

    Any incremental costs are small compared with the real opportunity cost saving of ditching the Climate Change Act. That is in the region of hundreds of pounds a year.
    Separately, there is also a built in assumption that the massive projected increase in costs per unit of electricity will be partly offset by a significant fall in consumption per capita. The true costs should include the investment required to achieve this, along with the reduced living standards from living in cooler and less well lit homes.
    There is another aspect not dealt with. This spare capacity will be in the form of fossil fuels. It will mean re-commissioning mothballed coal-fired power stations, backed up by greater use of diesel engines. The accuracy of the cost estimates will be contingent upon the outcome of the bidding. Given that 53GW is around six or seven times the amount entered into the STOR scheme bidding process, there might be some “heroic” assumptions here. But, then I am just a former cost accountant, denying the efficacy of sophisticated scientific computer models.
    Maybe instead one should ask Ed Davey how this announcement will affect meeting the emissions targets. Maybe it will affect it not at all, as next week there will be a new paper out defining these as transitional emissions, so not included in the progress to a low carbon economy.

  11. Herve permalink
    July 4, 2014 5:44 pm

    Whatever wrong could be Davey’s statements, a guy fully soaked with leftist propaganda, he recognize at least that erratic renewable do need a solid thermal back-up to prevent electric net collapses. We disagree with him about the £1.6B/annum, Industry will have anyway the Last Word.
    But Davey is less stupd than present german government which – despite ringing alarm bell from its Energy Minister S.Gabriel (leftists) – dared to make two decisions:
    1- They still belive that “capcity market” is unnecessary…
    2- They intend to ban gaz fracking up to 2021…

    … buy Gasprom stock

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