The Dirty Dozen – diesel power subsidisation in the UK

An InfluenceMap Report

December 2016

The UK government spent over £6.8bn of taxpayers money last year subsidising the fossil fuel industry despite pledges at the G7, G20 and the UNFCCC levels to phase out such payments. This study focuses on the payments to the operators of diesel power electric power facilities as part of the UK's capacity market programme.

It analyses the emergence of a new business that the capacity market has made viable - the operation of small-scale, highly polluting, diesel-powered generating facilities, in receipt of up to £260m over the next few years. This study assesses this start up sector in detail and how it has turned a climate-motivated government policy to its advantage to distort markets and reap outsize returns for both the operating companies and investors.

"This first rate report clinically demonstrates just why the emergence of diesel powered gensets as a significant component of power supply procured through the capacity market mechanism is such a worrying development. We surely now ought to be urgently looking at ways to remove these diesel sets from auctions now, and if possible claw back some of the money that has already gone out of the window in their direction.” Alan Whitehead, UK Member of Parliament, Shadow Minister for Energy and Climate Change, Labour Party

“At a time when we need to rapidly phase out fossil fuels – to both clean up our air and avoid the worst of the climate crisis – it is simply extraordinary that the government is supporting this highly polluting form of electricity generation. The fossil fuel industry receives £6bn a year in subsidies from this government whilst support for clean energy has been slashed over recent years. This report raises serious questions about who is benefiting from these hand outs – it’s certainly not the taxpayer, including the many thousands of people struggling to keep their homes warm this winter.” Caroline Lucas, UK Member of Parliament, Green Party

This report was updated on Friday 10th December 2016 following the capacity market auction results. Diesel companies received less payments than anticipated, due to the withdrawal of capacity market bids in the weeks before the auction and/or not entering bids at a winning price.