Ed Davey makes his mark – but not in a good way

Here’s what Secretary of State Ed Davey told us on Friday (at midnight, naturally) on what he has plumped for on the future of gas-fired power stations.  He has decided that:

  • The level of the Emissions Performance Standard, designed to limit the emissions from individual plant, will be enshrined in primary legislation. Power stations consented under the 450g/kWh-based level would then be subject to that level until 2045, a process called ‘grandfathering’ which provides long-term certainty to gas investors.
  • The Capacity Market will be designed to bring forward sufficient investment in new reliable capacity, including gas, in order to ensure security of electricity supply. This will help to ensure that there is sufficient capacity in place to cope with peaks and troughs in demand.

Sounds OK? No it isn’t. In my humble opinion it ranks as one of the stupidest and most thoughtless pieces of decision-making in government for some time.  It rugby-tackles and negates all the (apparently now pious) agreements the Government has entered into on climate change targets, such as adopting the fourth climate change budget just recently.

Those are by any reckoning very serious charges. So how do I justify them?  I see, incidentally that everyone present at the most recent DECC questions (me included) was accused by a sketch writer of speaking a peculiar corruption of the English tongue called ‘energese,’ so I will attempt to explain it all in English, if possible. Certainly the Davey announcement is fluent ‘energese’, so it needs to be translated in the process.

What the announcement means is that only new power plants that emit carbon dioxide at less than 450 grammes per kilowatt hour of energy produced will in future get consent. Anything above that level will not, which of course includes new coal fired power stations. But new gas power stations will ALL come in at under 450gms – they will emit about 400. So it says that we will be able to plan for and build as many new power stations of this type as we like in future years.

Then it says that all these new plants will be ‘grandfathered’. What that means is that anyone who has built a plant emitting – say 400gms per kilowatt hour – will have guarantees issued that they will not be disturbed in their emissions until 2045 – the likely lifetime of plants being built in the near future.

It finally says that the capacity market (by which he means the introduction of ‘capacity payments’ in the near future, designed to reward ‘availability’ of plant so that the government knows it can deliver, if required the power that is remanded at any particular time) will help ‘bring forward sufficient investment.’  Too right it will. Already there is a glut of gas fired plants in construction, or in the planning or worked up proposal stage. Even the National Energy Planning statement admitted to 8gw under construction and 9gw in the planning stage. Now there’s much more.

So if you are a gas power station developer, what’s now not to like about the new regime? You can build what you like where you like and no-one will limit your output subject to being able to sell it in the (unreformed) energy markets. What’s more, you will get paid for simply being there, whether you sell your power or not. I somehow think a large number of new power plants will get built. Damien Carrington in the Guardian suggested this week that we will need to ‘hold the line’ at capacity payments, which he thinks, might limit the output of these new gas fired power stations. That’s not quite how I read it. Capacity Payments (in the revised form now being put forward by DECC) will reward ‘readiness to produce’. They will not limit what a power station can sell if it has a buyer. For gas fired power stations, it would be business as usual, with the added bonus of some money thrown in if they promise to make sure business really is as usual.

What then, would ‘business as usual’ mean, under these new conditions?  Currently, gas makes up 35% of our generating capacity. Some scenarios increase that proportion as other supplies dwindle, but let’s say that, under the new liberal regime gas continues to make up about 35% of capacity. That’s 35% at least of our supplies UNTIL 2045. It will be more, since last year in terms of actual power supplied (i.e. who produced what power from their respective plants); gas supplied 44% of the fuel for our electricity supply. Let’s say, 40%

So 40% of all our electricity supply until 2045 will carry with it 400 gms of CO2 emissions until 2045. You don’t need to do much maths to calculate that, even if everything else is renewable or very low carbon (say 50gms) this averages out, over the sector at 190gms per kw hour fixed until 2045.

That really is, in perpetuity, rather a long way away from what the government has signed up to in the fourth carbon budget (the Climate Change Committee says, in order to keep on track overall, the electricity generating sector will have to come in at around 70gms per kwh by 2030), or even what the Government recently said itself in ‘the low carbon strategy’ signed off by the Prime Minister, no less. ‘By the end of the fourth [carbon] budget period, our analysis suggests that emissions from electricity generation could be between 75% and 84% lower than 2009 levels’. So that’ll be between 75% and 89% lower that the approximately 450gms per kwh emitted in 2009 – between about 112 and 60gms. Well not any more it won’t after this announcement.

Put simply, because of the importance of the energy sector to carbon emissions generally, and because of preponderance of gas in our present supply, guaranteeing its continued dominance at near current levels of emissions means that the whole plan for carbon emissions reduction goes out of the window.

Well done Ed, you certainly stamped your mark on the Department of Energy very early on.  They saw you coming didn’t they?

2 thoughts on “Ed Davey makes his mark – but not in a good way

  1. Alan:

    Congratulations upon this pellucid description, which is very far from written in “energese”.

    It is a broad rule of thumb that one should always be suspicious of any anouncement that emerges around Friday midnight.

    Is there any silver lining that you can observe?

  2. Pingback: There’s a smell of gas in the basement… | alan's energy blog

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