he cost of keeping the lights on will more than triple next year through a new subsidy designed to keep energy plants running. UK energy consumers wi

 

he cost of keeping the lights on will more than triple next year through a new subsidy designed to keep energy plants running.

UK energy consumers will be forced to pay £378m through their energy bills to support the Government scheme which offers contracts to power plants to guarantee that they will produce power.

The contracts will be awarded to the a power plants which offered the lowest fees through a capacity auction which ended on Friday and will pay for 54GW of power at a price of £6.95 a kilowatt

The cost will dwarf the £120m price paid for a modest reserve bench of 3GW of power supplies for this winter, maddening critics who claim that millions of pounds will be paid to polluting power plants which would have been running anyway.

Through the auction over 96pc of power will come from existing power plants and interconnectors while only 3pc will be sourced from new projects. A tiny minority of payments will be made to companies which reduce demand.

Gas-fired power plants will lead the way with 22GW to clinch contracts but coal-fired power will also be a major contributor of electricity next winter at over 10GW despite Government plans to phase out the polluting generation by 2025.

Energy Minister Jesse Norman said: “Thanks to this auction, homes and businesses can have confidence in the availability of that electricity at the lowest possible cost.”

But Jon Ferris, an analyst with Utilitywise, likened the scheme to a “sledgehammer trying to crack a nut”.

“Government should instead incentivise demand reduction or flexibility at peak times to help consumers and the businesses that depend on a well-functioning energy market particularly at a time of economic uncertainty,” he said.

The costly winter power programme piles further pressure on energy consumers who are expected to face rising energy bills in the months ahead.

Npower put its prices up by over £100 a year for 1.4 million households on Friday and other large energy suppliers are expected to follow, with experts predicting that by the end of April all six will have raised prices by between 5pc and 10pc.

The hike is likely to be seen as a slap in the face to the energy regulator, which warned companies only a fortnight ago to keep a lid on prices.

Ofgem boss Dermot Nolan issued suppliers a stern caution against price hikes, saying the companies should be able to swallow a surge in energy costs to avoid passing on higher prices to consumers.

 

telegraph.co.uk

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