Grid’s capacity auction will not meet future energy needs

National Grid’s latest capacity auction to secure backup electricity for 2020-21 will not stimulate the promised new wave of gas-fired power plants, Prospect union has warned.

Speaking on behalf of 24,000 energy specialists working in generation, distribution and transmission, the union’s deputy general secretary Dai Hudd said: “The auction has effectively deferred resolving where the bulk of the UK’s future electricity will come from.

“The current approach to energy policy is like treating a broken leg with Paracetamol – it may take away the pain but it doesn’t solve the problem.”

Although National Grid awarded contracts for around 52GW of electricity, the price secured fell below analysts’ expectations.

They had forecast a significantly higher price than previous auctions because this one aimed to procure around 5GW more capacity.

“The latest auction has secured a host of small-scale generation, but we are no nearer to solving the problem of where the bulk of the UK’s electricity will come from after 2025 as existing nuclear and coal stations close.

“The eventual price range of £22.50 per kilowatt/year for 2020-21 is far below the £35-£45 needed to stimulate development of gas-fired power,” said Hudd.

Of the 50 provisional winning bidders, only two are planning medium-size new build projects – two 300MW projects at Kings Lynn and Spalding.

The remaining 48 projects are a mix of battery storage, waste-to-energy, inefficient open-cycle gas turbines and small-scale polluting diesel.

While Prospect has always championed the need for a balanced, low-carbon energy mix, it believes that the time has come for a national energy conversation.

“We need to set a market structure that encourages the large-scale plant and skills we need for the future, rather than closing our eyes and hoping for the best.

“The challenge for government is to create a market where generators invest in plant and skills to secure a reliable electricity supply.

“The current policy does not give companies any incentive for large-scale investment and does not encourage individuals to develop a long-term career in generation,” concluded Hudd.

The capacity market was introduced in 2014 to head off future power shortages as coal plants close and low power prices dissuade investors from building new ones.

Power plant owners are paid to make back-up electricity available at short notice.