Energy market leaves consumers paying unneccessary subsidies - report

The IPPR think tank claims nuclear power plants have secured hundreds of millions of pounds in subsidies despite the fact they would be likely to remain open without state support.

Its report looking at the performance of the Government’s “capacity market”, the auction process where energy providers bid to provide guaranteed generating capacity, found in 2014 a third of contracts were awarded to plants which had indicated they did not require subsidies.

Only five per cent of subsidies have so far gone to supporting new power plants and support has gone to coal and diesel generators when the Government is also trying to cut fossil fuel consumption.

Byron Orme, the author of the report, said: “The government rightly wants to secure the country’s power supply. But its primary mechanism for doing so is failing to meet any of the government’s own objectives.

“It is absurd that consumers are paying for subsidies to the most polluting forms of generation such as diesel and coal while in a separate policy also paying to discourage them.

“It is very wasteful to be subsidising nuclear power stations to stay open in four years’ time when they would almost certainly do so anyway.

“New technologies to manage demand at peak times offer the potential to reduce costs to bill payers, but cannot properly compete due to the bias in the scheme towards large power stations. The capacity market needs fundamental reform if the lights are to be kept on at reasonable cost to households and businesses.”

The report is the latest criticism for the Government’s energy policy which has come under scrutiny amid the ongoing uncertainty over the plans for a new nuclear reactor at Hinkley Point in Somerset.