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Energy: Million $$$$ government windfall when wind doesn’t blow

Richard North — Eureferendum — July 14, 2013

The Government is set to make a windfall profit of hundreds of millions of pounds out of a lucrative scheme to sell power from thousands of the emergency diesel generators it owns to the National Grid.

The cash will come from using them to guard against the times when the wind is too low to drive the expanding fleet of wind turbines, so staving off widespread blackouts.Public buildings, including NHS hospitals, prisons, Army barracks and RAF bases, police and fire headquarters, schools and council offices equipped with emergency generators are to be asked to make them available on 20-minute standby to back-up the grid when supply is short. For this, they will be paid premium rates, soon to rise to the equivalent of £600 per Megawatt hour (MWh) of electricity produced.

This is more than 12 times the rate currently paid to ordinary power station operators, and six times the rate paid to inshore wind farm owners. Potentially, this makes Government-owed generators worth hundreds of millions to George Osborne. But it also represents another “stealth tax” on hard-pressed electricity consumers, brought about by the increasing reliance on wind power which is already heavily subsidised.

The scheme, managed by National Grid, is known as the Short Term Operational Reserve (STOR).  It is better known in the private sector, where it is part of what is sometimes called “Demand Response” or even “Demand Side Response” (DSR). But the Government involvement is the real explanation behind our report on the Guardian finding that four NHS hospitals had “signed up to a deal under which they will reduce demand at peak times by using diesel-fired generators”.

What the Guardian was seeing was the front end of a contract agreed earlier this year between the Government Procurement Service (GPS) and five leading electricity demand management companies called  “aggregators”. These highly specialist companies are ready to exploit the huge back-up bonanza created by the wind industry, turning the Government, potentially, into one of the largest providers of reserve electricity in the country. This turns privatisation on its head.

One of the aggregators which featured in the Guardian piece was KiWi Power. To administer the contract, it is working alongside another of Britain’s leading aggregators, Flexitricty, which appeared in the Financial Times on 6 September 2010, claiming that private industry “can make millions of pounds annually, and help reduce the UK’s carbon footprint, by selling spare electricity to the National Grid”.

Now, Government is getting in on the act, alongside private sector firms, all part of what is called “Demand Side Response” of which the National Grid’s “Short Term Operating Reserve” (STOR) is part.

In particular, the Government and the aggregators are benefiting from the National Grid’sAggegrator Model in STOR, introduced in December 2010, a new set of rules which effectively kick-started a new and highly lucrative electricity back-up  industry.

The rules, approved by the Coalition Government, were designed to encourage new entrants into the “reserve” market, to meet the desperate need to compensate for the intermittency of wind farms and their unpredictable performance.

This ups the reserve capacity available from about 2GW to 8GW by 2020 – equivalent to five nuclear power plants. Without it, the system will be destabilised by the wind power, leading to localised and general collapse and prolonged blackouts.   Continue reading, here…..

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