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Consumers face bill for power stations to be mothballed amid blackout fears

The Telegraph|Edward Malnick|September 22, 2013
United Kingdom (UK)Taxes & SubsidiesEnergy Policy

In June, Ofgem warned that the risk of blackouts in 2015 had risen to one in four, if energy demand continued at its current level. Uncertainty around the amount of available electricity in 2015 and 2016 meant that it was "prudent" to consider keeping mothballed plants in reserve, it said. GDF Suez, the energy company that has mothballed its Teesside gas power station, has estimated that keeping plants on standby could cost between £90 million and £120 million per year.


They will be paid to mothball, rather than demolish, power stations taken out of service.

The plans come as oil and coal plants are being closed due to European Union directives, which have been introduced to cut emissions that scientists have said lead to climate change.

The move is being planned after Ofgem, the energy regulator, warned of electricity shortages within the next three years.

Ofgem said the measure was needed because new wind farms and nuclear plants have not been built in time to replace the oil and coal power stations being phased out.

Critics of wind power said turbines were flawed because they do not generate electricity when there is little wind, while plans for nuclear power stations have yet to reach the …

... more [truncated due to possible copyright]

They will be paid to mothball, rather than demolish, power stations taken out of service.

The plans come as oil and coal plants are being closed due to European Union directives, which have been introduced to cut emissions that scientists have said lead to climate change.

The move is being planned after Ofgem, the energy regulator, warned of electricity shortages within the next three years.

Ofgem said the measure was needed because new wind farms and nuclear plants have not been built in time to replace the oil and coal power stations being phased out.

Critics of wind power said turbines were flawed because they do not generate electricity when there is little wind, while plans for nuclear power stations have yet to reach the construction stage.

Documents submitted to Ofgem's consultation on the plans reveal that energy firms are expecting to receive as much as £120 million under the scheme, which would ultimately be added to consumer bills.

It is one of a series of schemes that National Grid believes will help keep the electricity system stable as Britain adopts more forms of renewable energy.

Under another scheme, companies are building diesel power stations to provide a reserve of energy in case of short-term drops in electricity.

National Grid has also published plans to pay factories and large businesses to switch off their power if electricity demand comes close to outstripping supply.

Ed Davey, the Energy Secretary, said the proposals to make use of mothballed plants were a "cost-effective" way to ensure Britain can "keep the lights on".

National Grid, the body responsible for the electricity transmission network, said the plants would be used as a "last resort". Energy firms would be paid annual rates to keep the plants on standby, in addition to any fees for generating electricity in the event that they are needed.

The proposals were set out by National Grid following talks with Ofgem and the Department of Energy and Climate Change (DECC), aimed at ensuring a sufficient supply of electricity in the middle of the decade.

Six oil and coal power stations have been closed in the past five years, with a further three plants due to shut down by the end of 2015.

In June, Ofgem warned that the risk of blackouts in 2015 had risen to one in four, if energy demand continued at its current level.

Uncertainty around the amount of available electricity in 2015 and 2016 meant that it was "prudent" to consider keeping mothballed plants in reserve, it said.

GDF Suez, the energy company that has mothballed its Teesside gas power station, has estimated that keeping plants on standby could cost between £90 million and £120 million per year.

Responding to Ofgem's consultation, it criticised the proposal for encouraging existing gas-fired plants to remain in reserve instead of producing power. GDF Suez was also among the energy companies, including SSE, to express concerns about the potential cost of the scheme.

SSE said it had not been shown that the scheme would provide better value for money than bringing forward the "capacity market"; a more permanent mechanism by the Government to pay gas-fired plants to be available when needed. It is not expected to take effect until 2018.

A spokesman for National Grid indicated the costs of the scheme would be in the "low tens of millions a year" and possibly less.

"The competition to provide this service, and a large uptake of our demand side product, could mean the cost could be far less. Because we are still consulting on these products, it's too early to say for sure," he said.

"In terms of what this cost would be for consumers, we're talking less than 50p on their annual bills."

According to figures published by National Grid in July, there are four large, mothballed power stations.

All of these plants are gas-fired and have stopped operating as a result of low profits for gas generation.

The stations - Keadby in North Lincs; Teesside, near Middlesbrough; Roosecote in Cumbria; and Barking in east London - could generate more than three gigawatts of electricity, which is enough to power about 2.4 million homes on average.

However, GDF Suez has indicated that Teesside is unlikely to take part in the scheme.

A spokesman for the DECC said: "The measures consulted on by National Grid and Ofgem would - if used - enable the procurement of the amount of capacity needed to ensure security of supply, allowing them to respond accordingly.

"National Grid's proposals will also be designed to allow existing mothballed generation which meets environmental requirements to provide capacity.

"Bids would be assessed to ensure this is done at a cost that represents value for money for consumers."

Separately, it has been suggested that several companies are building diesel generator plants to provide a backup for National Grid because of the unreliability of wind turbines.

Some companies are receiving payments for power more than 10 times above the wholesale price of electricity, as they benefit from a £100 million pot to ensure that an adequate supply of energy is being maintained.

The payments for diesel generators are made under the National Grid's short term operating reserve system (Stor).

The scheme was designed to provide a reserve of additional power available at short notice in case power plants cut out due to faults.

But it is being seen by energy companies as a way of providing a reserve for wind farms when the wind is not blowing.

Green Frog Power, based in Birmingham, is building a dozen diesel plants across the country to provide electricity.

Its website states: "Wind power is currently the UK's only viable source of large-scale green energy.

"It doesn't work when the wind is too gentle or too strong. Green Frog Power uses the best available technology to provide backup for wind energy.

"Every megawatt of power we install provides cover for 10MW of wind power failure risk."

In June, Fulcrum Power applied for permission to build a power station comprising 52 diesel generators in Plymouth, Devon.

In its application, the company said the national power grid was subject to large fluctuations which are "predicted to become greater with the advent of unpredictable renewable generation such as solar and wind".

It added: "The need for reserve will also increase as old oil and coal stations close over the coming years."

A spokesman for National Grid said that Stor was used to manage potential power losses in general and was "not there to manage wind intermittency".


Source:http://www.telegraph.co.uk/ea…

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