Two coal power plants will be paid a combined £77m to be on standby this winter as part of National Grid’s plan to minimise the risk of electricity blackouts.
The size of the UK’s capacity margin – the buffer zone between available power supply and predicted peak demand – will be revealed on Friday when National Grid publishes its winter outlook.
The margin is understood to be higher than the 5.5% predicted by National Grid earlier this year. That was itself an improvement on last year’s “tight but manageable” 5.1%.
The improved position has been achieved partly by paying around £144m for tools that can be used in case of unexpected events, such as a shutdown at a major power plant.
The largest of these tools is the supplemental balancing reserve (SBR), under which power plants are paid to be on standby for four months, ready to start up if needed.
Of the eight firms to win SBR contracts, the largest is the Eggborough coal power plant in North Yorkshire, which has agreed to provide up to 681MW of power.
Calculations by the climate campaign group Sandbag, and confirmed by separate industry sources, suggest Eggborough will be paid £60m to be on standby. The sum is the equivalent of more than 10% of the plant’s revenue during its last 18-month reporting period.
A coal plant owned by the power firm SSE at Fiddler’s Ferry in Cheshire is understood to have been paid £17m for the same service, making 422MW available.
Both plants will earn more if they are told to move to “hot standby”, an advanced state of readiness, and they will also be paid during startup and if they are asked to generate power. They will earn £3,908 and £3,000 an hour respectively to be on hot standby and £11,513 and £3,000 an hour while starting up. They will be paid for any energy they generate at guaranteed prices well above the average wholesale price.
The Sandbag energy analyst Dave Jones pointed out that coal power plants also stand to make millions from other subsidies and price spikes when energy demand is high.
“Many coal power plants are on for a bumper 2016,” he said. “The transition to phase out coal is happening quickly, but National Grid, Ofgem and the government must make sure the transition is not more expensive than it needs to be.”
National Grid is estimated to have spent £122m on SBR contracts this year, up from £33.9m last winter, to ensure that 3.6GW of capacity can be activated if needed. Peak demand is forecast to be 52.7GW this winter, while 54.7GW of capacity is available to draw on.
The extra spending is partly down to the closure of other coal plants as the UK aims to phase out the heavily polluting energy source by 2025.
The SBR is among several measures designed to minimise the risk of blackouts. National Grid is also paying for demand-side response, under which businesses are paid to use less energy, or change the time that they use it, if there is high demand.
The measures have cost £144m this year, or £1.80 on the average household bill, according to an estimate by the Energy & Climate Intelligence Unit.
The measures are designed to avoid blackouts in the event of a perfect storm of problems, such as multiple power plant failures during the high-demand afternoon period on a cold, windless day.
This winter is the last in which the emergency toolkit will be used. From next winter the new capacity market auction, one of several electricity market reforms and under which firms bid to provide power to National Grid, is expected to ease the constraint on capacity margins.
But the government is facing calls to make it easier for demand-side response to be used, rather than simply ratcheting up the amount of energy being produced by power plants.
