Sandbag has called for a series of rule changes to limit carbon emissions from the growing number of distributed peaking plants in the UK.
In a blog on its website, the climate change think tank said although small reciprocating engines are cheaper to build and more flexible than large combined-cycle gas turbines (CCGTs), they are also less fuel-efficient, meaning they emit more carbon dioxide per megawatt.
Whilst they may be needed to provide backup power for intermittent renewables, they must also be prevented from emitting more carbon dioxide than necessary, it argued.
“Provided peaking plant running hours remain as low as possible and best practice efficiency is used in their construction – their cost and flexibility benefit will far outweigh the increased emissions intensity,” the blog explains.
“Unfortunately, neither of these conditions are currently being met – resulting in excess carbon emissions.”
To rectify the situation, the think tank said the government should first and foremost extend the 450gCO2/kWh instantaneous emissions limit proposed in its coal phase-out legislation to all new build generation with a thermal capacity of more than 1MW.
The blog says modern engines are available in a wide range of efficiencies from below 38 per cent to almost 50 per cent, but because there are no safeguards in place to prevent developers from selecting the cheapest and least efficient, the average efficiency of the UK’s current fleet is towards the bottom end of this range.
An emissions limit of 450gCO2/kWh would ensure those built in future would have minimum efficiency of around 46 per cent. The think tank said the limit should eventually be extended to existing generators outside of critical periods of peak demand.
Peaking plants have secured a substantial proportion of the new build agreements awarded in capacity market auctions to date, consistently fending off competition from CCGTs.
To begin with, many of these were “dirty” diesel engines, prompting the Department for Food, Environmental and Rural Affairs to introduce new limits on the emissions of sulphur dioxide, nitrogen oxides and dust, which were passed into law in January.
Whilst the cost of complying with these regulations has halted their success, Sandbag said limits on carbon intensity would provide a second line of defence against their return, “completely preventing new build diesel even if future market conditions changed”.
The blog also notes that plants with a thermal capacity of less than 20MW are not required to buy carbon allowances through the EU Emissions Trading System (ETS) to cover their emissions. There is a further dispensation for individual generating units with a thermal capacity of less than 3MW, even if they are operated in fleets of more than 20MW.
Sandbag said it believes more than 1GW of peaking plants in the UK are benefitting from these exemptions, artificially displacing more efficient plants in the merit order. The issue has been exacerbated by the rising price of ETS allowances, which has almost doubled to around €15 per tonne since the beginning of 2018.
The blog says the government should immediately move to close the loopholes, with the upcoming Electricity Market Reform (EMR) review providing an opportunity to do so.
Peaking plants connected at the distribution level similarly enjoy a number of financial advantages over power stations connected to the transmission network. In June last year, Ofgem decided to drastically reduce the most valuable of these so-called “embedded benefits” – residual triad avoidance payments.
However, Sandbag said those that remain, in particular exemptions from balancing services use of system charges, are incentivising peaking plans to run outside of the natural merit order, just like the carbon price exemption. The think tank did not propose any specific remedies to prevent distributed generation from being “excessively rewarded” but welcomed Ofgem’s initiation of a targeted charging review to examine the current market design.
The organisation also raised concerns over a lack of transparency, explaining that there are currently “no published figures for the running hours of distributed generation”. It said the government should require distributed generators to release these numbers to enable further scrutiny of their emissions.
The blog was written as a follow-on to a joint report released recently by WWF and Sandbag, which claimed there is no need for new large gas plants to replace Britain’s retiring coal capacity.