UK government backs 1.5 GW of diesel to plug winter power crunch

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While the developing world is ditching the diesel and embracing solar – often with the direct financial assistance of British companies and the government – ministers in the U.K. are set to grant vast subsidies to support the creation of 1.5 GW of diesel power capacity to plug the country’s growing energy gap.

Just weeks after the Department of Energy and Climate Change (DECC) confirmed that further cuts to solar subsidy will be enacted on January 1, 2016, the Financial Times (FT) has reported that companies have been invited to build around 1.5 GW of diesel power under a government-backed scheme which, if followed through to its full allocation, could cost the British taxpayer £436 million ($671 million) and add several million tonnes of carbon emissions to the atmosphere every year.

This Capacity Market Auction is backed by Treasury funds and has set subsidies for diesel at such attractive rates that even some solar companies have lodged bids, including developer Lark Energy, which hopes to build an 18 MW diesel generation plant at its Ellough solar project in Suffolk in order to maximize state-backed returns.

The government will also press the National Grid to actually pay large energy users – such as hospitals and factories – to switch to back-up generation this winter in order to ensure demand strain on the grid is not too severe. Much of this back-up capacity is diesel-powered, essentially meaning the government will reward some of the nation’s biggest energy users by switching to polluting diesel.

"Ministers claim to be helping consumers by cutting support for the cleanest energy sources but are about to force them to pay millions to one of the dirtiest," said Greenpeace chief scientist Doug Parr.

An energy department spokesperson told the FT: "Small-scale flexible generation, such as diesel, has a small but important role to play in securing our electricity system. It responds quickly, doesn’t have to warm up and is run for short periods, so emission impacts are limited."

The coming winter could see the gap between available power supply and projected demand reduced to just 5% – the tightest margin in a decade, warns the National Grid. The government’s response has been to actively pay electricity provider additional funds to make additional capacity available at short notice.

This Capacity Market Auction is favorable to diesel, which is only slightly less polluting than coal and cheap to build and plug into the grid. This pro-diesel playing field is avoidable, former energy secretary Ed Davey told the FT, revealing that EU rules forbidding the discrimination against any one type of generation have been left unchallenged.

"The government has got to take measures to stop it because it is extraordinarily counterproductive and absolutely was not what was intended by the capacity auction", Davey said. "We don’t want diesel plants being built anywhere."

Chief executive of UK Power Reserve, Tim Emrich, has said that the auction is a waste of Treasury incentives and has called on the government to delay or cancel completely the auction.

Lightsource refinances 101 MW of PV

One of the U.K.’s leading solar developers, Lightsource Renewable Energy Holdings, has refinanced £284 million ($437 million) of solar assets worth 101 MW and comprising 33 ground-mounted solar farms.

The deal was overseen by financial advisors M&G and AMP Capital and represents the company’s first foray into the long-dated institutional market. M&G Investments provided £247 million of inflation-linked finance, with AMB Capital providing £37 million via an eight-year mezzanine facility.