A loophole in the government’s energy policy that could have seen billpayers funding billions of pounds of subsidy for old coal plants will be closed, officials have told the Guardian.
The move is a victory for analysts and campaigners who argued large coal subsidies would heavily undermine ministers’ drive to reduce carbon emissions, as well as costing consumers dearly. However, some coal payments will remain and critics say the policy still undervalues energy saving measures.
The loophole appeared in a new policy aimed at ensuring the lights stay on in the UK in coming years as ageing coal and nuclear power plants are closed.
The so-called capacity market pays generators a fee simply to be available when needed and was meant to support new gas-fired power stations, which are about half as polluting as coal plants.
However, old coal plants that invested in major upgrades to cut air pollutants such as nitrous oxides and sulphur oxides would also have been eligible for the longest 15-year subsidy deals.
The thinktank e3g and campaigners Greenpeace calculated this could have led to £5-10bn being paid to old coal plants. The UK currently hosts nine of the top 30 most polluting coal plants in the EU and in 2013 coal had its greatest share of the energy market since 1970.
But on Friday a spokeswoman from the Department for Energy and Climate Change (Decc) told the Guardian the loophole would be closed: “We are going to amend the capacity market rules to clarify without any doubt that only new projects can access the 15-year maximum term.
We will be consulting on this shortly.” She added: “Existing plants undertaking refurbishment can access a maximum of three-year agreements.”
A three-year deal would provide insufficient subsidy to make upgrading old coal plants financially viable.
Greenpeace UK energy analyst Jimmy Aldridge said: “One colossal waste of billpayers’ money has now been ruled out, but the government is still offering ageing coal plants other subsidies worth hundreds of millions, putting our climate ambition at risk and locking us into more years of dependence on coal, the dirtiest of all fuels.”
The closure of the loophole was very good news, said Prof Catherine Mitchell, an energy policy expert at the University of Exeter.
“But continuing with a broad capacity mechanism that favours big power plants and existing big companies is still far inferior to a targeted alternative that includes cutting demand at key times and which would be cheaper, more flexible, a better fit with Europe, and much less easy to rig,” she said.
Mitchell said enabling more big energy users to be paid for cutting demand at crunch times and building more interconnectors to other countries had worked better elsewhere. Companies can apply to take part in December’s capacity market auctions from Monday.
Dave Jones, policy analyst at energy thinktank Sandbag, said the fundamental problem preventing the phase out of dirty coal-fired power plants was the very low cost of pollution permits in the EU’s emissions trading scheme (EU ETS).
The recent recession and heavy lobbying from industry saw far too many permits available, meaning the price has been very low.
“We are very happy that Decc has closed this absurd loophole but the battle against unabated coal is still far from won,” Jones said.
“The UK now has to strain every sinew for a long term solution to this problem; meaningful reform to the EU ETS.”
In July, the energy secretary, Ed Davey, called for a “significant number” of EU ETS permits to be cancelled, but other EU nations, led by Poland, are resistant.
theguardian.com
The move is a victory for analysts and campaigners who argued large coal subsidies would heavily undermine ministers’ drive to reduce carbon emissions, as well as costing consumers dearly. However, some coal payments will remain and critics say the policy still undervalues energy saving measures.
The loophole appeared in a new policy aimed at ensuring the lights stay on in the UK in coming years as ageing coal and nuclear power plants are closed.
The so-called capacity market pays generators a fee simply to be available when needed and was meant to support new gas-fired power stations, which are about half as polluting as coal plants.
However, old coal plants that invested in major upgrades to cut air pollutants such as nitrous oxides and sulphur oxides would also have been eligible for the longest 15-year subsidy deals.
The thinktank e3g and campaigners Greenpeace calculated this could have led to £5-10bn being paid to old coal plants. The UK currently hosts nine of the top 30 most polluting coal plants in the EU and in 2013 coal had its greatest share of the energy market since 1970.
But on Friday a spokeswoman from the Department for Energy and Climate Change (Decc) told the Guardian the loophole would be closed: “We are going to amend the capacity market rules to clarify without any doubt that only new projects can access the 15-year maximum term.
We will be consulting on this shortly.” She added: “Existing plants undertaking refurbishment can access a maximum of three-year agreements.”
A three-year deal would provide insufficient subsidy to make upgrading old coal plants financially viable.
Greenpeace UK energy analyst Jimmy Aldridge said: “One colossal waste of billpayers’ money has now been ruled out, but the government is still offering ageing coal plants other subsidies worth hundreds of millions, putting our climate ambition at risk and locking us into more years of dependence on coal, the dirtiest of all fuels.”
The closure of the loophole was very good news, said Prof Catherine Mitchell, an energy policy expert at the University of Exeter.
“But continuing with a broad capacity mechanism that favours big power plants and existing big companies is still far inferior to a targeted alternative that includes cutting demand at key times and which would be cheaper, more flexible, a better fit with Europe, and much less easy to rig,” she said.
Mitchell said enabling more big energy users to be paid for cutting demand at crunch times and building more interconnectors to other countries had worked better elsewhere. Companies can apply to take part in December’s capacity market auctions from Monday.
Dave Jones, policy analyst at energy thinktank Sandbag, said the fundamental problem preventing the phase out of dirty coal-fired power plants was the very low cost of pollution permits in the EU’s emissions trading scheme (EU ETS).
The recent recession and heavy lobbying from industry saw far too many permits available, meaning the price has been very low.
“We are very happy that Decc has closed this absurd loophole but the battle against unabated coal is still far from won,” Jones said.
“The UK now has to strain every sinew for a long term solution to this problem; meaningful reform to the EU ETS.”
In July, the energy secretary, Ed Davey, called for a “significant number” of EU ETS permits to be cancelled, but other EU nations, led by Poland, are resistant.
theguardian.com
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