Ministers will offer more subsidies to electricity suppliers for back-up power

Ministers will offer more subsidies to electricity suppliers for back-up power, and increase penalties on those who renege on their agreements to provide it, in an attempt to improve Britain’s security of supply.
Amber Rudd, the energy secretary, announced on Tuesday that the government would give payments for at least 1GW more power as part of its capacity market auction as she tries to expand the country’s slim margin of peak supply over peak demand.
Energy industry figures have warned that as old coal plants shut down, the UK’s electricity supplies are becoming stretched. National Grid said this winter’s margin was just 1.2 per cent before last-resort measures were factored in — the lowest in a decade.
The capacity market auction was supposed to distribute subsidies to encourage companies to build new back-up power, especially gas, but instead has delivered millions of pounds to operators who use diesel generators and existing nuclear plants.
Ms Rudd said: “The capacity market has driven down costs and secured energy at the lowest possible price for bill-payers, but I’m taking further action to tackle the legacy of under-investment and ensure our country’s long-term energy security.”
The energy secretary is proposing to increase the amount of power being procured four years in advance to encourage more expensive sources of electricity such as new gas stations. The exact amount will be decided after a consultation.
She also intends to increase the fines that companies face if they accept subsidies but then do not provide the power they have promised. Earlier this year SSE, the energy company, announced it would shut its 2GW Fiddlers Ferry coal station despite having accepted subsidies to keep it open as a source of reserve power.
Separately, the energy department is consulting with the environment department about how to decrease the amount of subsidy received by highly polluting small-scale diesel generators. But Ms Rudd said she would not ban diesel from the capacity market altogether.

• Article link: http://www.ft.com/intl/cms/s/0/a6b7da2adf80-11e5-b67f-a61732c1d025.html#axzz4269Gweh3