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London - British households will pay nearly £1bn to help guarantee the country's electricity supply in 2018/19, after a government auction determined who will provide backup power capacity.
The auction, held by network operator national grid, set the price to be paid to capacity holders at £19.40 per kilowatt, giving plant operators clarity on how much their stations can earn in 2018/19.
British households will each have to fork out around £11 that year to help pay the generators, the government said on Friday.
"We are guaranteeing security at the lowest cost for consumers. We've done this by ensuring that we get the best out of our existing power stations and unlocking new investment in flexible plant," the secretary of state for energy, Ed Davey, said in a statement.
Back-up plan
The capacity market is designed to ensure backup power is available when intermittent, renewable energy sources fail to generate.
Successful bidders will be paid the cleared price for keeping capacity on standby and receive a premium if their plants are needed.
Britain is setting a benchmark in Europe by introducing the capacity market, which large power producers such as Germany and France are now also considering.
Experts said the price was less than what many providers had expected.
"(The clearing price) is below the annual fixed costs of most existing plant on the system," said Phil Grant, partner at energy advisory Baringa.
Some of Britain's proposed new power plants missed out in the auction, putting their future in doubt.
One of those is SSE's Abernedd plant, proposed to be built in Wales.
The utility said that following the unsuccessful auction for Abernedd it was unable to make a final investment decision to take the project forward.
Shares down
Shares in SSE were trading down 1.76% on Friday.
The utility secured capacity agreements for 4 409 megawatts in the auction for a selection of its hydro, gas-fired and coal-fired power plants.
New-build projects proposed by power generator InterGen were also missing from the list of successful bidders, with neither its Spalding extension nor its Gateway Energy project securing contracts.
Britain's Eggborough coal-fired plant, bought by Czech energy company EPH last month, was also unsuccessful in the auction.
The country's largest energy supplier, Centrica, secured contracts for two of its gas-fired power plants, Langage and South Humber.
The auction results are subject to verification by National Grid, due by January 2.
