Subsidies go to polluting plants to provide back-up for clean power

The subsidies are designed to keep the lights on when the wind stops blowing

Green campaigners rounded on the Government yesterday after it gave fossil-fuel plants most of the subsidies in a £1bn scheme to promote low-carbon electricity.

The subsidies, awarded after a bidding competition, are designed to keep the lights on when the wind stops blowing or demand spikes by paying generators a fee to guarantee that they will be on hand to provide electricity.

They will add £11 to the average household bill when they are introduced in 2018.

Consumer groups welcomed the payouts because they will be much lower than anticipated, while the Energy Secretary Ed Davey said they represented great value: “This is fantastic news ... We are guaranteeing security at the lowest cost for consumers.”

But green campaigners are furious because the subsidies have overwhelmingly been awarded to old coal and gas-fired plants at the expense of cleaner sources of electricity.

“The auction is wasteful, thoughtless, parochial and supports the status quo. The vast majority of the payments under the capacity market will go to the large, well-known generators,” said Catherine Mitchell of the University of Exeter.

The subsidy awards have set back the progress of green electricity in the UK – making it much harder to meet legally binding targets to reduce carbon emissions, critics said.

Only £47m, or 5 per cent, of the subsidies have been given to the new energy sources they were intended to promote, such as the relatively green, super-efficient gas stations. Most of the rest are going to existing fossil-fuel stations. This is because the new fleet of gas stations were, in effect, outpriced by the existing plants, which have lower costs and so can survive on smaller subsidies.

Some £451m worth of subsidies have gone to existing gas stations and £173m to old coal-power plants, including some that burn wood pellets.

Around £660m will go to plants operated by the big six energy producers, with Drax and GDF Suez among the other generators qualifying for the subsidies.

In some cases, the subsidies will go to new power stations, but most will be received by existing ones – some of which would have closed without them and some which would have stayed open anyway.

In some cases the plants will stand idle, only cranking into action when needed, while in others, such as nuclear, they will operate all the time. Nuclear power plants have received £153m from the subsidy pot.

Critics claim that awarding so much of the subsidy to fossil-fuel plants is a betrayal of a scheme designed to promote green energy. By favouring old coal and gas plants to provide the back-up supply when the growing number of – intermittent – wind and solar power plants fail to provide enough electricity, taxpayers are subsidising the very technologies the scheme was introduced to prevent, the critics say.

“Keeping the lights on is the single biggest energy goal of any government, but their ‘capacity market’ is an inefficient way of achieving this aim.” said Jimmy Aldridge, research fellow at the IPPR think-tank.

“Consumers will rightfully be asking whether this billion-pound handout was really required to pay energy companies to continue doing what they were already doing.”