Three major changes are expected to drive small plant – especially new ‘car park’ diesel fleets – out of the upcoming Capacity Market auction and benefit new large gas turbines.
The first, aimed directly at small diesel farms, will place tight pollution limits on new plant. A consultation from the Department for Environment, Food and Rural Affairs will place pollution controls on all plant over 1MW in size as required under the Medium Combustion Plant Directive. But Defra said faster and stricter action was required to curb emissions from high NOx emitting diesel plant.
BEIS had flagged up the planned crackdown on emissions in information about the upcoming Capacity Market auction. Now it says, “The proposed legislation to limit NOx emissions is likely to affect diesel generators, as well as gas engines that are not lean burn and gas turbines with higher NOx emissions – you are advised to check whether the proposals restrict your ability to operate or increase your operating and capital costs.”
Separately, BEIS has decided to go ahead with plans to cap CM payments for plant that has taken advantage of Enterprise Investment Schemes so the projects do not get ‘double subsidy’. That is likely to affect all types of ‘car park’ plant and BEIS put that total at around 500MW of capacity, saying “as the affected amount of capacity is relatively small and the auctions remain liquid, impacts on the clearing price are expected to be small.”
The change will apply to new plant entering the ‘early capacity’ auction for delivery next winter, but not if the new plant already has a Capacity Market agreement for delivery in later years. That is because the government is “mindful of the need to minimise the impact on decisions already taken”. BEIS added that, “Government has no intention to re-open CM auctions already concluded or to ‘unpick’ capacity agreements already awarded which is why 2014 and 2015 capacity agreements are to not fall within scope of the amended provisions.”
Finally, a consultation on the way that Capacity Market costs are charged back to suppliers (and customers) could mean small distributed generation has lower revenues – and that change will be applied to all small plant, existing and planned. The costs are currently allocated to suppliers according to their share of supply. But that share-out is done on a ‘net’ basis and so-called ‘embedded’ generation reduces a supplier’s liability – a cost saving which can be passed on to the distributed generator. BEIS says “The value of this saving varies relative to the overall costs of the CM, but was around £15/kW following the 2015 auction.” Now BEIS proposes changing the allocation to a ‘gross’ basis, arguing that small plant is receiving double benefit, with both Capacity Market contracts and the embedded benefit. The administration costs of the Capacity Market is also likely to switch from a net to gross basis to make it consistent.
That change will be applied to all plant. BEIS argues that investors should have factored potential changes in the way these charges are allocated into its original decisions.
Further reading: cap on enterprise-funded schemes ‘does not go far enough’
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