The capacity market may need a “basic redesign”, as proposals to reform it are beginning to look like “flogging a dead horse”, shadow energy minister Alan Whitehead has insisted.
Last week the government laid out a number of potential changes to the mechanism after the first two auctions brought forward just 4.5GW of new capacity and just one new combined cycle gas turbine (CCGT) plant.
The proposals include increasing the overall amount of capacity bought, selling some of it earlier and holding an extra auction for the winter of 2017/18 so the Contingency Balancing Reserve can be closed a year early.
Speaking to Utility Week, Whitehead said the government appeared to be “taking a large amount of money and throwing it up against a wall to see if any of it will stick to new gas fired power stations”.
He said it was unclear if the reforms would actually succeed in pushing up the auction clearing price by enough to encourage investment in new CCGT plants. Even if it did, he added, the cost could be “stupendous” – “probably getting on for £2 billion”.
Whitehead argued for a “much more fundamental rearrangement” of the capacity market in order to “reduce the amount of free money that was going out to various people for no apparent purpose” and to “concentrate more exactly” on what is required in terms of new build gas power stations.
He said he didn’t think the mechanism was on course to succeed in doing either of those things: “At the moment we’ve got probably the worst of all worlds.”
“You could almost get the conclusion that actually the department is flogging a dead horse”, he added.