Energy users will be required to pay £1bn in 2018 to keep power stations open. The National Grid did a capacity auction which ended at a price of £19.40 per KW – the agreed level of subsidy.
EDF is one of the major expected winners but other firms which form the “Big Six” are also expected to benefit – Npower, E.ON, SSE etc.
The government wants 48.6GW of power to be available by 2018. It hopes to encourage new gas-fired power stations to be built under the 15 year contract – 68% will be provided by existing infrastructure and 5% by newly built sites.
Moreover, 18% of the power will be generated via coal or biomass meaning it could signal the extension of heavy carbon – producing gases which are harmful to the O-zone layer.
To add, 16% of the capacity will be met by EDF’s nuclear power which is in part owned by Centrica which too has 2 gas stations.
Energy Secretary, Ed Davey hailed the auction a success as it guarantees energy supply for UK homes. “This is fantastic news for bill-payers and businesses. We are guaranteeing security at the lowest cost for consumers. We’ve done this by ensuring that we get the best out of our existing power stations and unlocking new investment in flexible plant”.
However, this auction is in fact only provisional and hence all agreements are subject to confirmation from the Department of Energy and Climate Change (DECC). The final price in the auction, £20, is much lower than, £75, the price the auction first began. The bidding system seems to ensure that only the cheapest of generators are able to provide the energy needs of the nation.
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