The UK has given more than £12.5bn from energy bills to fossil fuel power plants in the past decade through a government scheme to keep the lights on during winter, according to new analysis.
The research found that, since 2015, the government has offered contracts worth £20bn through a “capacity market” to create a backup reserve of generators on standby, of which about 60% were fossil fuel power plants and a quarter were energy storage and power cable projects.
This has included 90 gas power plants, which each clinched a contract of up to 15 years backed by a levy on consumers’ energy bills. It could mean households will still be paying for gas plants in 2040, a decade after the government has promised to eliminate 95% of fossil fuels from the UK’s electricity system.
The report, by analysts at Aurora Energy Research, was published weeks after the Guardian revealed that the power grid operator was forced to use a separate scheme to pay almost £18m to two gas power plants in a single day to safeguard Britain’s electricity supplies when high demand for electricity combined with low wind speeds.
An annual capacity market auction sets a subsidy price to pay owners of power generators – including gas, hydroelectric, wind and solar projects – to cover the cost of meeting electricity demand.
The UK offered the highest gas power payments in Europe, according to the report, which was commissioned by Beyond Fossil Fuels and found that in total almost €53bn (£45bn) has been granted to fossil fuel plants through Europe’s capacity markets since 2015.
The payments include contracts for almost 200 gas-fired power plants, some of which are new. Some of these new-build power plants will still be collecting payments by 2040, according to the research.
Italy has allocated €18.4bn in total, of which €15bn was given to gas plants, and only €2.2bn was paid to clean power options. Meanwhile, Poland’s €19bn capacity market awarded the largest share to coal-fired generators, which was almost a third of all payments.
Juliet Philips, a campaigner at Beyond Fossil Fuels, said the capacity market payments to gas plant operators present “a double blow for households” by adding billions of pounds to energy bills and keeping countries “locked into volatile fossil fuel markets for longer”.
She said: “Our reliance on burning fossil gas was the root cause of the energy crisis. We call for governments to end all fossil fuel subsidies and rapidly scale up investments in renewables, grids and clean flexibility solutions, which will stabilise energy bills and protect the climate.”
The cost of maintaining a backup supply of gas power to run during still, cold winter weather – when wind and solar power are in scarce supply – is expected to balloon in the UK over the coming years as the country relies increasingly on renewable power to provide the backbone of its power system.
Campaigners are calling for the government to accelerate a plan to set up an “out of the market” mechanism to manage backup gas-generated power to ensure plant owners are not allowed to command ultra-high prices when power supplies are tight, the report said.
A government spokesperson said: “The capacity market mechanism ensures our electricity supply is secure and meets demand – we have consulted on proposals to ensure unabated gas plants can decarbonise and will update in due course.
“Our mission for clean power by 2030 will replace our dependency on unstable fossil fuel markets with clean, homegrown power controlled in Britain – which is the best way to protect bill payers and boost our energy independence.”
