Last week’s elections provided the government with an ideal opportunity to bury bad news. Most obvious was the botched attempt to hide the U-turn over compulsory academy schools that took centre stage in George Osborne’s Budget. Less obvious was the panicked announcement that £38 is to be added to everyone’s energy bills to pay the energy companies to do what they were probably going to do anyway.
Faced with falling supply margins, the government has brought forward the planned Capacity Market Auctions through which energy companies bid for government subsidies to maintain spare generating capacity. The Department for Energy and Climate Change argues that the auctions are necessary to keep Britain’s lights on next year, and that the projected price rise should be set against the likely increase that would result from an energy shortage.
However, writing in the Guardian, Terry Macalister highlights concerns that the Capacity Auctions provide the wrong kind of incentives. Previous auctions went to nuclear and fossil fuel plants that would have operated with spare capacity anyway; while additional capacity has come from the most polluting diesel generators. Concerns about the Capacity Market system suggest that the government – either deliberately or unconsciously – are locking the UK into pre-existing fossil fuel and nuclear capacity. As Macalister notes:
“Energy companies have been closing coal, gas and other power stations because they say wholesale power prices are so low that it is not commercially viable to keep them open.”
Providing a subsidy (funded by bill payers) to maintain some of this capacity in the short-term will be at the expense of developing a sustainable energy mix in future. Macalister cites Catherine Mitchell, professor of energy policy at the University of Exeter:
“The capacity market system inherently favours fossil fuel generation, damaging the environment while delaying the widespread rollout of a flexible grid based on renewables, demand management, storage, interconnection and more efficient practices, as the national infrastructure commission and Energy UK have recently recommended.”
Sadly, DECC were able to get away with the release of this news on Election Day because – just for the moment – UK voters simply do not regard energy as a political issue. When the lights go out and businesses fail for lack of affordable electricity, this may change. But by then, we will lack the resources to resolve the crisis.