Late post. But an important story that should not be neglected.~ctm
Surprise judgment means government must halt capacity market scheme
Thu 15 Nov 2018 07.59 EST Last modified on Fri 16 Nov 2018 11.39 ES
The UK’s scheme for ensuring power supplies during the winter months has been suspended after a ruling by the European court of justice that it constitutes illegal state aid.
Payments to energy firms under the £1bn capacity market scheme will be halted until the government can win permission from the European commission to restart it.
The scheme subsidises owners of coal, gas and other power stations so the plants are ready to ensure that electricity for businesses and homes is available at peak times in winter.
The UK has also been blocked from holding any capacity market auctions for energy firms to bid for new contracts to supply backup power in the future. National Grid said ministers had instructed it to indefinitely postpone auctions that had been planned for early 2019.
The government said it was disappointed by the judgment but insisted that power supplies were not at risk.
On Thursday, the ECJ ruled that the European commission had failed to launch a proper investigation into the UK’s capacity market when it cleared the scheme for state aid approval in 2014.
The ruling renders the capacity market unlawful for a “standstill period” while ministers seek state aid approval from the European commission. It is not clear how long that will take, but it could be many months.
The court’s surprise judgment was an embarrassment for Greg Clark, the business secretary, who hours later outlined his vision for the future of the power market to energy executives at an event in London.
Industry watchers said the decision would send shockwaves throughout the sector.
“The consequences are absolutely huge. Immediate cessation of payments is going to have immediate consequences for electricity generators that were relying on them,” said Ed Reed, head of research at analysts Cornwall Insight.
While electricity supplies were unlikely to be at risk, he added, companies may seek to recoup lost capacity market revenues through wholesale power prices instead.
“The lights are not going to go out. We certainly have enough power stations. But the consequence is the market price might go up.”
Tom Glover, UK country chair of RWE, which owns the biggest fleet of gas power plants in the UK, said he was “deeply disappointed” and his company was facing a “significant negative hit” to its earnings.
Bernstein Research said the suspension of payments would hit earnings at British Gas owner Centrica, plus RWE, Uniper and SSE.
Sara Bell, founder and CEO of Tempus Energy, which started the challenge in 2014, said: “This ruling should ultimately force the UK government to design an energy system that reduces bills by incentivising and empowering customers to use electricity in the most cost-effective way – while maximising the use of climate-friendly renewables.”
The company believes that the capacity market favours fossil fuel generation at the expense of alternative ways of securing electricity supplies, such as “demand side reduction”, where companies reduce electricity demand at times of need.
Read the rest of the story at the Guardian.
•HT/Note yourself. Not sure everyone submitting these wants their full name called out. May have to add a field to the tips and notes to identify preference.
No wonder the UK voted for Brexit; to get out of the EUSSR, a mafia-type organisation run by unelected, incompetent, failed politicians, the leader of whom is permanently drunk.
Sooo subsidies to inefficient renewables is good, subsidies to efficient conventional generation is bad?
Had a chuckle at this: http://gridwatch.co.uk/widgets
Reminds me of when I connected the AVO 8 to a 700v supply on the 10v range. Ooops. Before the boss found out I opened it up and straightened the pointer out. 😉
The ridiculous thing is that backup power subsidies are only needed because of subsidies and other market distortions that benefit wind and solar. The correct solution is to ban all state subsidies and other market distortions, every power producer has to sell power at the spot market price.
I happened to watch UK Parliament TV where the energy committee of MPs and Civil Servants discussed the topic below two years ago;
“demand side reduction”
Rough translation is….. rack up the energy prices until consumers turn off the gas and electricity because they can no longer afford it.
One Civil Servant explained that this would be the best option as it would give the consumer the illusion of choice whether to go bankrupt or freeze.
Problem is that PM May did not want to ever leave the EU, and this thinking has lead to the present mess.
As for the other main problem, the so called “Hard Border”. This is the same as the border between Canada and the USA, but the EU has not had border controls for so long that the thought of one in Ireland between the two halvees is not liked.
But in practice there wouldbe no problems, the Irish customs would pass the fellow Irish and no other EU people.
Anyway there will be many other so called Hard Borders between the English South Coast and the Continent, so what is all the fuss about.
MJE
Problem is that PM May did not want to ever leave the EU, and this thinking has lead to the present mess.
As for the other main problem, the so called “Hard Border”. This is the same as the border between Canada and the USA, but the EU has not had border controls for so long that the thought of one in Ireland between the two halvees is not liked.
But in practice there wouldd b e no problems, the Irish customs would pass the fellow Irish and no other EU people.
Anyway there will be many other so called Hard Borders between the English South Coast and the Continent, so what is all the fuss about.
MJE
Try to use your brains everyone and not your emotions.
This has nothing to do with sovereignty, is it to do with private enterprise receiving government subsidies which give that company an unfair competitive advantage over others (in the whole of Europe. In the UK we buy electricity off the whole of Europe).
Not only that why the heck should the tax payer subsidise a private company?
Come on Yanks, you know that free market means if you cant deliver as a company you die, and that this is right?
By your reasoning paying a fire brigade when there is no fire going on is a “subsidy”.
This is very worrying for a Swede by the way. Here we have “always” paid for having spare generating capacity available. It is an absolute necessity to maintain system integrity in winter.
And by the way when you need that extra power you most likely won’t be able to buy it. Weather is often much the same over most of Europe.
That is the kind of argument I expect from a 12 year old.
Should you ,m the tax payer, subsidise PRIVATE business.
Fire men are NOT private business.
Neither is the National Grid a private business. But those who can keep the lights on when the stupid windmills don’t work, aren’t paid to be waiting (spinning reserve) to keep the lights on. Who is the stupid 12 year old here MattS? I don’t think you even understand the issue here.
Earthling2 says
“Neither is the National Grid a private business.”
Actually it is, and its shares are traded on the London Stock Exchange
The national grid is not an energy provider, it is a national distribution network.
And you accuse me of not understanding the issue?
So you are saying the National Grid private company is getting the subsidies? I think the name gives it away that it is the electricity distribution network. Had me confused that the national grid would actually actually name its private company The National Grid. Ok…the joke is on me with this one, but doesn’t change the facts of why a capacity charge is paid to those who could keep the lights on, right? I bet you would support paying a subsidy to battery companies willing to keep batteries fully charged waiting to supply the grid if the stupid windmills quit working?
I stand corrected Bryan. A simple Google search says the National Grid plc is a British multinational electricity and gas utility company headquartered in Warwick, United Kingdom. I always thought the name itself implied it was a national grid, presumably owned by the Crown. (I am North American) But I too learn something new everyday. Thanks. But I still stand behind my statement that we need to keep the lights on, preferably without too many windmills messing up the grid, especially if there is to be no available capacity market.
It is illegal to subsidise private companies and give them an unfair advantage in Europe. It is the law, and it is a good law. The UK must follow the law. Period.
Except the law has been selectively followed (benefiting wind and solar companies) resulting in the problems the subsidies were meant to address. It does no good saying “you can’t subsidize these private companies” (fossil fuel companies) while at the same time continuing letting the government befitting “those private companies” (wind and solar). Either insist the “unfair advantage” be stopped for all or live with the “unfair advantages” being doled out as the government sees fit in order to “keep the lights on”
The court ruled that the policy is at variance with the rules of the European single market. Those shouting ‘brexit’ ought to know that it was the British who were the major force behind its inception. And what a good idea it has been, indeed so much so that even after brexit the UK wants and needs acess to it.
So, the UK was undermining its own brainchild, that’s the gist of it. It is called irony.
This is why we need to restore the authority of the UK Parliament over all external bodies. BREXIT must mean BREXIT.
The woman who heads up Tempus Energy, the ruthless company that did this at the ECJ is a woman named Sara Bell. Time to put her’ in Coventry’ folks in Britain… Maybe she would then realise just how damned selfish & stupid she is.
It is unfortunate that a painful lesson in stupidity will have to be learned in the dead of winter for the UK. The world should pay close attention to both the UK and the OZ, because the penetration rate of unreliable renewables is past a technical threshold that makes the grid able to function properly without the base load being available instantly, because now it will not be paid to even be in back up mode. Now you can’t even pay good money to have this waiting capacity ready to step in and provide the base load power. This is when the revolution begins. When the lights and heat go out.
And this is where things get real ugly, because the renewable wind and solar have a right as a low carbon source to priority access to the grid, and if they don’t produce because it is dark or the wind doesn’t blow, well just be prepared to pay through the nose for peak demand times, or maybe be prepared for a blackout because the coal base load will be shut down and not enough peakers or batteries built. In the middle of winter when it is freezing. This is what the CAGW climate change meme has wrought. Without the Capacity Market being available in a heart beat to be able to step in and supply just in time base load to keep the grid in synch, then the load demand has to be reduced either through higher pricing or just straight up brown out or black out. You couldn’t make this crap up, and I never thought it would come to this…I just thought it was about extorting more money out of consumers on the back of climate change. Which it is, but the lights are now still possibly going out. For no good reason!
This is about Demand Side Response, or rather Demand Side Destruction by ensuring the spinning reserve from the older coal and NG plants isn’t even available because now capacity can’t even be auctioned off as it is now illegal according to this ruling from the EU. Just bizarre. This is the kind of logic that leads to Brexit, but will also be the logic that leads to the ultimate destruction of the European Union. I find it totally ironic that it is this climate change boogie man that is now actually destroying the political union. A real lesson to be learned here for the rest of the world.
As Sara Bell, Tempus Energy founder and CEO who brought the suit said: (who stands to benefit greatly from this decision) “I intend to enforce the hell out of this judgement. There is no time to waste in solving climate change. The faster the money flows in the right direction, the faster we solve climate change.”
https://www.carbonbrief.org/qa-what-next-for-uk-capacity-market-after-surprise-eu-ruling
Piffle.
Private companies survive or go under. It is the rule of free market economics. And if some shoddy UK firm cant supply the juice we will buy it off the French who have nuclear and a huge capacity.
The key point is that it is not a free market.
The government introduced massive market distortions to benefit wind and solar. When they realised the huge disadvantages, they tried to balance things by adding market distortions to benefit fossil fuel.
This ruling unbalances the market again.
The best solution would be to remove all market distortions; the problem is that the government is locked into long term contracts with wind and solar companies.
I am changing the bargain, pray I do not change it again.
the Vader quote is “I’m altering the deal. Pray I don’t alter it any further.”
“This is the kind of logic that leads to Brexit, but will also be the logic that leads to the ultimate destruction of the European Union. I find it totally ironic that it is this climate change boogie man that is now actually destroying the political union.”
Irony—The Pranksters on Olympus are loving it! “What fools these mortals be!”
PS:
“But though the immediate victory may thus go simply to the better gladiator, I believe it is safe to say that he often ruins his cause, if it is intrinsically a bad one, by winning. The Prohibitionists scored a glorious triumph in 1920. They not only got their law; they also converted at least four-fifths of all the morons in America. But they began to go downhill from that moment. The history of controversy, in truth, is a long history of winners losing and losers winning.”
—H.L. Mencken
Just “effing” Brexit.
Remember “When in the course of human events…”?
It won’t happen, of course, politics being the chosen domain of the spineless, the cowards and the selfish, but it would be so nice to hear the UK government tell Brussels to stuff it.
EU makes the rules; Brittania waives the rules!
Well, there is still a couple of days that you collect firewood, before this cold spell reaches England and/or Europe.
If the cold misses England, shut off the outgoing interconnector to Europe.
Tell them that is because England isn’t allowed to run reserve power generators.
In the NFN department, while I do think this is typical of the overbearing european command and control perspective on the economy, capacity markets themselves are command and control institutional solutions so this is a bit of the pot calling the kettle black.
Texas operates without a capacity market and the prices at auction for the real time loads reflect the cost at which suppliers are willing to bid without a capacity market. So if some suppliers decide its not worth remaining as spinning reserve waiting to be called based on their forecast of how much real time auction capacity they would supply then the costs in those real time auctions would rise.
It isn’t that having no capacity market makes the costs disappear, but it is a command and control decision of the EU sort as to whether this is better reflected in realtime pricing or not. Ironically enough, nondispatchable resources are being offered capacity payments on the ISO-NE grid. go figure. This kind of thing makes me thing the capacity market can be a charade captured by vested interests even though surely EU bureaucratic anti-carbon nonsense is perhaps worse.
The EU….what a scam that is, as bad as the UN.