Capacity market: Fossil fuel companies controlled by tax haven entities receive millions in subsidies

Fossil fuel companies and nuclear power producers, some of which have been involved in shaping government energy policy, will receive over £834 million* in state subsidies for the winter of 2019-2020, the government has announced.

The big winners of the capacity market auction, which is managed by National Grid and is designed to ensure the UK has enough power during times of peak demand, include companies which are controlled by tax haven entities.

German energy companies RWE and E.ON and French-owned EDF got the three largest capacity contracts, with fellow big sixer Centrica placed at number seven.

Among the successful bids were two interconnectors submitted by the capacity market contracts manager: BritNed Development Limited, a joint venture between National Grid and Dutch TSO TenneT, and National Grid Interconnectors Limited.

Subsidies for dirty diesel

National Grid has refused to release a full breakdown of the results, citing commercial sensitivities, but auction data shows that at least 35 diesel power generating facilities have won contracts.

£175 million of capacity payments will go to diesel generators, according to The Guardian, including seven owned by Prime Energy Development Limited. The company, who bid successfully for 15-year contracts, is linked to George Grant, who also has a stake in Stag Energy.

Stag has been an active player in shaping UK energy policy, submitting evidence to key consultations such as the energy and climate change committee’s Draft Energy Bill, during which it recommended excluding clean energy projects from the capacity market. 

In fact, Stag Energy even brags on its website about George Grant’s energy policy influence.

He is praised for demonstrating “to policy makers and policy influencers the importance of government providing the appropriate regulatory framework to support new infrastructure investment in the gas to power chain (eg the UK capacity market) to ensure lower carbon emissions and cost-effective security of supply.”

Tax havens

Some of the state subsidy winners include companies controlled by shareholders or parent companies based in tax havens.

At least two of them are owned by offshore firms UK Strategic Reserve Limited is a subsidiary of the Cayman Island-based UK Power Reserve (Holdings) Limited, while electricity market player Coryton Energy Company Limited is also run out of the Cayman Islands.

Other winners controlled by tax haven entities include Flexitricity, which belongs to Switzerland-based Alpiq Bleu Energy AG, and Dione Holding, a Malta-based company with shareholders registered in the Isle of Man, that owns seven winning facilities.

According to Sandbag, a climate policy think tank, the capacity mechanism will add £941m to electricity bills in 2019.

“In total this capacity mechanism has contracted £1.18 billion of future capacity. In the 2019 figure, we include capacity procured under multi-year contracts covering 2019 in last year’s auction.”

*This is a provisional figure, with final results due to be released after a period of 8 days