Scores of small power plants planned for the UK are at risk of being scrapped because of an overhaul of energy subsidies – an outcome that threatens to increase electricity shortages in coming winters. More than 2,000 megawatts of generating capacity – the equivalent of two nuclear reactors – could be thrown into doubt if the subsidies which incentivised them are withdrawn, according to investors behind some of the projects. Small gas and diesel-fired plants – each generating up to 20MW of electricity – have become an important part of the UK energy mix as old coal and nuclear plants shut down. Their growth has been aided by lucrative payments for generating at times of peak demand without the hefty transmission charges faced by large power stations. Ofgem, the UK energy regulator, announced a review of these incentives – known as embedded benefits – last July because of concern they were distorting the market. A provisional ruling is due early this year and Ofgem has signalled reform is likely. Small power plant developers say removal of embedded benefits would wreck the economic case for building many projects which National Grid, the UK electricity system operator, is counting on to maintain adequate capacity in the next five years.
FT 24th Jan 2017 read more »