A leading think tank has slammed the government’s policy to avoid future blackouts as “not fit for purpose”, in a report released today.
The IPPR said despite awarding £2.8bn in subsidies to power companies, the government’s “capacity market” scheme is failing to meet its own objectives.
It comes amid rising concern Britain isn't building enough new gas power plants, with the country's old, uneconomic coal power plants due to be phased out by 2025.
The “capacity market” offers subsidies to power plants that can provide back up energy to meet increased demand over the winter period.
It aims encourage successful generators to keep existing power plants open or build new ones by providing a predictable revenue stream.
The IPPR derided the scheme for handing windfall payments to power stations that would be highly likely to be online anyway.
Across the two auctions held so far, nuclear power plants have received payments amounting to £153m in 2018 and £136m in 2019, despite being almost certain to remain open then without receiving these subsidies.
It also said since the capacity market was introduced, only five per cent of subsidies have gone to new power plants in each year’s auction.
While the government has now announced a consultation to expand the capacity market to encourage more new gas-fired power, the IPPR warned its current design will unnecessarily add to the costs to consumers.
The capacity market was also criticised for providing poor value for money, cuts across plans to reduce carbon emissions and favours large power stations over more efficient, flexible "demand management" technologies.
“The government rightly wants to secure the country’s power supply. But its primary mechanism for doing so is failing to meet any of the government’s own objectives,” Byron Orme, IPPR research fellow and author of the report, said.