Question to the Department for Business, Energy and Industrial Strategy:

To ask the Secretary of State for Business, Energy and Industrial Strategy, what analysis his Department has made of the effect of reciprocating gas and diesel generation on (a) the likely Third T4 auction price and (b) the likelihood of securing new combined cycle gas turbine generation capacity.

The prequalification results for the 2016 four-year ahead Capacity Market auction have been published on the Electricity Market Reform Delivery Body’s website[1]. Around a quarter of the pre-qualified capacity is new-build, and nearly half of this is from combined cycle gas turbines (CCGTs). Approximately 6.1GW of reciprocating engines (existing and new) have also prequalified.

The competitive nature of the auction means it is difficult to predict accurately the specific technologies and projects that will win agreements. CCGTs and gas reciprocating engines differ with respect to their cost and revenue profiles, with both technologies able to play a valuable role in the electricity market – CCGTs are highly efficient at providing baseload generation, whereas gas reciprocating engines are highly flexible and useful for helping balance the electricity system. Both will also compete against new interconnection, storage and demand-side response bids.

My department has been working – as have Ofgem and Defra – to address potential distortions in the wider market and so ensure all projects compete on a level playing field.

A mix of new build technologies, in addition to existing capacity, could win, with competition bearing down on the auction cost to deliver value for money for the consumer.

[1] https://www.emrdeliverybody.com/CM/prequalification.aspx