Energy secretary defends £175m ‘dirty diesel’ subsidy

Energy secretary, Amber Rudd, has had to defend a subsidy cost put at around £10 per household for supporting a new batch of 650MW/£175m small scale, heavily polluting diesel generators, under the second round of the Capacity Auction process.  The Government now faces calls for urgent investigation into how the energy companies were awarded these subsidies to provide the UK with backup energy generating capacity.

Critics said an energy generation auction overseen by the National Grid had descended into a farce by rewarding intensive carbon dioxide emitters, just as ministers committed Britain to lower carbon emissions at UN climate change talks in Paris.

The National Grid confirmed that it had secured the 45GW of back-up power generation it wants to meet peak periods of electricity demand starting in 2019. Bidders of gas, nuclear and diesel-fired plants agreed a price slightly lower than achieved during the first auction last year.

Gas-fired power stations won half of the contracts on offer but no energy companies put forward plans to build new gas facilities as the government had hoped.  There were also deals for an unspecified number of coal-fired power stations, despite promises from the government that coal would be phased out at the start of the next decade.

Sandbag, an organisation which campaigns to reduce CO2 emissions, had estimated the £175m costs.  Bryony Worthington, founder of Sandbag said: "The UK's power auction is a complete shambles," going on to say the money is being spent on all the wrong things.

The Renewable Energy Association said firms offering storage and other greener technological solutions were losing out. Frank Gordon, senior policy analyst at the REA, said: “This year’s capacity market auction underlines the problems with the policy – that it does nothing to support the move away from higher carbon to clean energy, and it does not adequately consider value for money.”

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