Britain’s richest energy companies want homeowners to subsidise billions of pounds worth of gas-powered stations that will stand idle for most of the time.
Talks have taken place between the Government, Centrica, owner of British Gas, and other energy companies on incentives to build the power stations needed as back-ups for the wind farms now being built around the country.
It is understood 17 gas-fired plants worth about £10 billion will be needed by 2020.
The Energy Department has been warned that without this massive back-up for the new generation of heavily subsidised giant wind farms, the lights could go out when the wind dies down.
Sam Laidlaw, chief executive of Centrica, said renewables, such as large-scale wind energy, were intermittent and required back-up generation, a role gas was uniquely qualified to fill.
But as power stations that operate only intermittently would not be financially viable, Laidlaw said: ‘The building of new gas-fired capacity must be incentivised so that gas can fulfil its role as a bridging fuel.’
To that end, energy companies are asking the Government for ‘capacity payments’. This ensures firms are paid a fee all year round for keeping a plant on standby.
As in previous subsidies, homeowners would be asked to pay for them through yet another levy on their fuel bills, which are already expected to soar by up to 20 per cent this year alone. The Department is considering the request from energy companies and an answer is expected in a new energy White Paper due later this year.
Industry sources insist the Government has no alternative but to agree to the ‘capacity payments’ for standby generation if it wants wind power, which also receives huge subsidies, to provide one-third of Britain’s energy needs.
In winter, when the most intense cold period coincides with a high pressure front, most wind turbines do not work.
One industry executive said: ‘Why would we build a power station – costing about £600 million – that is guaranteed to make a loss because it is not used most of the year?’
By 2020, most of Britain’s nuclear plants, old gas-fired plants and coal-fired power stations will be closed, leaving a 30 per cent energy gap to be filled by more new nuclear plants and more wind power.
British Gas managing director Phil Bentley has warned prices will have to rise by at least 15 per cent to compensate for the soaring cost of wholesale gas.
Meanwhile the oil price dropped again on fears over the global slowdown.