The UK government has invested over £12.5 billion over the past ten years in fossil fuel power plants through a capacity market scheme designed to ensure reliable electricity supply during winter, according to Aurora Energy Research.
The scheme offers contracts to generators to maintain a backup reserve, with the government awarding close to £20bn in contracts since 2015.
Of the £20bn total, the report found about 60% of contracts went to fossil fuel power plants, including around 90 gas power plants.
Some of the gas plants will still be receiving payments in 2040, a decade after the Labour government’s target to eliminate 95% of fossil fuels from the UK electricity system.
Meanwhile, around 25% of contracts went to energy storage and power cable projects.
The capacity market auction sets a subsidy price to pay power generators, including gas, hydroelectric, wind, and solar projects, to cover the cost of meeting electricity demand.
The cost of the scheme is added to energy bills, meaning UK consumers indirectly pay a portion of the cost as part of the overall unit price of electricity.
UK gas power payments
The UK offered the highest gas power payments in Europe, according to the report, which was commissioned by Beyond Fossil Fuels.
In total, almost €53 billion (£45 billion) has been granted to fossil fuel plants through European capacity markets since 2015.
Juliet Philips, a campaigner at Beyond Fossil Fuels, said the capacity market payments to gas plant operators present “a double blow for households” by adding billions of pounds to energy bills and keeping countries “locked into volatile fossil fuel markets for longer”.
Philips said: “Our reliance on burning fossil gas was the root cause of the energy crisis. We call for governments to end all fossil fuel subsidies and rapidly scale up investments in renewables, grids and clean flexibility solutions, which will stabilise energy bills and protect the climate.”
In response to the report, a UK government spokesperson told the Guardian: “The capacity market mechanism ensures our electricity supply is secure and meets demand – we have consulted on proposals to ensure unabated gas plants can decarbonise and will update in due course.
“Our mission for clean power by 2030 will replace our dependency on unstable fossil fuel markets with clean, homegrown power controlled in Britain – which is the best way to protect bill payers and boost our energy independence.”
