Sunday, 8 November 2015

The Modern Economics of Electricity Generation - UK, A Case Study

Hundreds of millions of pounds worth of subsidies will be handed to highly polluting diesel-fuelled electricity generators, under plans to preventpower shortages over the next few years.Companies have registered to provide 4,000 megawatts of standby power under a government auction scheme designed to help the UK cope with the intermittent nature of wind and solar energy - The Times, November 2015.

In an article written by Irish Energy Blog last June, it was stated that: (The economics of electricity generation)

 So now, we enter into a new era of electricity generation economics where subsidies are required to maintain all generators, not just the renewables. 

This is precisely what is now happening in the UK. Due to the fact that they have invested heavily in non dispatchable renewable generation, they are facing a shortage in dispatchable generation - that is, generation available on demand. The quickest solution to this problem is to use diesel generators. But these diesel generators will be running intermittently and would not be economically viable.  So the UK National Grid will pay subsidies to diesel generator owners to maintain their capacity available on standby.

A similar situation is happening in Ireland where DSUs (demand side units) get paid capacity payments. There is now 160MW of these diesel generators in Ireland.

Had UK invested in dispatchable plant, like CCGT gas plants, they would now be using cheaper and cleaner more efficient forms of generation instead of diesel. Unintended consequences of the Green Energy Rush are now hitting home.

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