Is the party over for dirty diesel generators?
In the last few years the UK has seen a proliferation of diesel generators – sometimes referred to as “carpark generators” or “peakers”. These small scale diesel generators, typically up to 20MW of installed capacity per site, are used either to provide a backup power supply, or increasingly to feed power in to the grid when the system is tight.
In recent years the capacity margin – or amount of spare capacity in the electricity market – has fallen to historically low levels. Consequently, the Government and National Grid have created a number of mechanisms to procure additional capacity, such as the Capacity Market, Supplementary Balancing Reserve, and Short Term Operating Reserve (STOR). Small scale diesel and gas generators have been very successful under these policies, accounting for the majority of new capacity brought forward under the Capacity Market, and a quarter of total capacity in the STOR mechanism.
However, the growth of diesel generators in particular has been criticised on environmental grounds. Diesel generators produce greenhouse gas emissions two to three times that of a combined cycle gas turbine (per kWh of electricity produced). They also emit significant quantities of local pollutants such as nitrogen oxides and particulate matter, which can be extremely damaging to health as discussed in a recent Policy Exchange report.
New European rules (the Medium Combustion Plant Directive) will impose tighter emissions limits for smaller scale power stations such as diesel generators. However, the MCPD has some significant loopholes – such as a block exemption from emission limits for all combustion plant operating for less than 500 hours per year. This will limit the impact of the directive on diesel generators used to provide backup power. In any case, following Brexit it is unclear whether the directive will still be transposed into UK law. In our most recent report on air pollution, we recommended that Government should develop tighter emission standards (beyond those set in the MCPD) to limit the development of more polluting forms of generation such as diesel generators in polluted parts of the UK such as London.
It appears that Government is now acting on this recommendation. Earlier this year DECC flagged concerns about the amount of diesel generation supported in the Capacity Market, and proposed that Defra should consider setting new emission limits. Defra recently issued an update on its thinking, providing a warning shot to developers ahead of the next Capacity Market auction. Defra plans to consult on a new set of emission limits this Autumn, which it says will “primarily affect diesel engines”. Firm details are yet to emerge but it appears that the new regulations could apply to new and existing projects.
Clearly, there is tension in this debate between the need to ensure security of supply of electricity, and the need to improve air quality. One of the reasons for the success of diesel generators in capacity auctions is that they are the cheapest form of capacity available at present, so limiting their development is likely to increase the cost of procuring new capacity. On the other hand, large parts of the UK already experience levels of Nitrogen Dioxide (NO2) which are well above legal and healthy limits, and allowing further development of diesel generators in these areas would only make matters worse.
For this reason, we suggest that Defra should bring forward a two-tier system of emission limits. This would impose tough emission standards in areas at or above NO2 concentration limits, and a somewhat less stringent set of standards for other parts of the UK. London has already created a two-tiered system of standards for small combustion plant including diesel, which could be used as a model. If standards are designed correctly this would make it difficult or impossible to build a new diesel generator where NO2 levels are already too high, and encourage developers to locate elsewhere. Equally the regulations would encourage developers to utilise less polluting forms of generation, such as lean burn gas turbines, which are slightly more expensive but considerably less polluting than diesel generators.
The more difficult question for Defra is what to do about existing diesel generators – in particular the backup generators commonly found in hospitals and other large buildings. Defra has signalled that generators used solely for backup purposes would be exempt from the new regulations. However, there is an increasing blurring of the lines between generators used for backup purposes and commercial purposes. National Grid has been actively recruiting hospitals and other organisations to make backup generators available at peak times and avoid blackouts (see article). Whilst this is desirable from a security of supply point of view, it is highly questionable from an air quality point of view – particularly since hospitals are typically located in urban locations close to some of the most sensitive receptors (for example I have heard anecdotally about generator flues venting directly into car parks and communal areas in hospitals used by patients!). The regulations need to be designed so as to avoid placing undue restrictions on genuine backup generators, but at the same time limit the extent to which these same generators can run purely for commercial reasons. Enforcement could also be an issue, since as far as I know there is no central database of small scale generators, and some have been in place for decades.
This is an important but thorny issue, and Defra and BEIS will need to work very carefully to ensure that the new regulations strike the right balance between ensuring security of supply and improving air quality.