Guardian: “The bizarre prospect of Britain being bailed out by ‘diesel generation parks’ is now a reality as an energy supply shortfall nears crisis point.”
“One of the new niche areas for investment in the energy sector is – no, not solar arrays, wind farms or anaerobic digestion plants, but diesel generation parks. It is one of the ironies of the current “energy crisis” that it has allowed the return of one of the most carbon-polluting technologies at a time when we are trying to tackle global warming.
How did it happen? The running-down of traditional electricity generating capacity, due to the closure of old atomic reactors and dirty coal-fired plants, has left the UK threatened by the lights going out at peak times. And so enterprising, if not green, entrepreneurs have realised there is cash to be made by assembling a load of old diesel generators in a field or industrial park and offering them as power sources when the National Grid is struggling to meet demand.
A high-profile energy specialist, who has asked to remain nameless, said he had received a steady stream of diesel-power providers over the last 12 months looking for City cash to expand, or advice on initial public offerings. These fossil-fuel projects tend to be small, but their total capacity is already in the hundreds of megawatts, which could just be the difference between lights on or blackouts as traditional capacity shrinks.
Generally, the diesel generation parks are not providing power to the grid but offering it to other businesses or organisations, allowing them to fall into the category of “demand-side response” at peak moments. National Grid is forced to operate these days on the Tesco motto of “every little helps” and last week was forced to rush out an initiative offering payments to those who could offer new capacity to the system this winter.
The original idea was that the network operator would encourage power providers such as Centrica or SSE to de-mothball some of their gas-fired or other idle electricity generating stations for the winter of 2015-16 when capacity margins – the difference between demand and supply – are expected to be at their very tightest, 2%.
The new call for more immediate assistance has come because the situation this coming winter is looking increasingly precarious, with twoEDF nuclear plants at Heysham and Hartlepool offline because of a technical fault. They should be back in action by the end of December, according to the French-owned generating company, but we can’t be sure. And their two gigawatts of atomic power is out of action at a time when capacity has been reduced at two coal-fired facilities, Ironbridge and Ferrybridge, because of fires.
Both the grid and the industry watchdog, Ofgem, play down the idea that we are running into a crisis and insist they are just being prudent and preparing for all eventualities.
So should we be worried? Peter Atherton, an equity analyst at Liberum Capital, is surprised by the sudden call for more capacity and questions how much can be conjured up at such short notice. But equally, he argues it is not yet time to panic: “These [nuclear and coal plants out of action] are just two unforeseen events that have arrived but it would take four or five to knock over the system.” This could come via an extremely cold winter that sends demand soaring or a windless winter that leaves turbines unturned, or just a few more problems at big traditional power stations.
The government’s Energy Act has provided a range of tools, such as capacity payments and contracts for difference, to deal with the wider power crunch and to stimulate investment in new capacity.
But this crisis caused by old stations going offline faster than newer – greener – ones can be constructed has been a long time in the making. If attempts to patch up the system this winter look more Heath Robinson than hi-tech then that is because they are. Where is that old diesel generator in the shed?”
Future Today
