Capacity Market ‘undermining’ industrial strategy

The UK Government’s Capacity Market is forcing consumers to pay hundreds of millions of pounds extra to decarbonise the energy system and is undermining ministers’ industrial strategy, according to a new report.

The Association for Decentralised Energy (ADE) has calculated that building combined heat and power (CHP) plants instead of gas-fired power stations would help save between £656 million and £774m on energy bills a year by 2030.

The trade body said the 8GW of power-only capacity secured through the Capacity Market so far was inefficient.

It argued that, although gas-fired power stations and diesel farms had lower up-front costs, their overall cost was higher due to their fuel costs.

30% more efficient

The ADE called on the UK Government to set a goal of sourcing as much as possible of the required 14GW of gas generation to be CHP.

It said CHP was up to 30% more efficient than gas alone.

Its report said more than 2,000 businesses are already using CHP, delivering more than £375m in cost savings to the UK economy.

The trade body wants the benefits that CHP brings to be acknowledged in the Capacity Market auctions.

‘A clear answer’

Tim Rotheray, Director of the ADE, said: “The economy depends on competitive business.

“Those businesses need to decarbonise cost effectively to remain competitive in the future.

“Today’s report provides Government with a clear answer on how to support industrial competitiveness and deliver a significant carbon reduction.”

Meanwhile, the Government has said it will look to secure around 50GW of capacity in the next T-4 capacity market (CM) auction for delivery in 2021/22, some 2GW less than the preceding auction.

> Read ADE's report