UK’s Electricity Market Reform Delivery Plan Published

Up to £110 billion of private sector investment in the electricity sector is set to be unlocked with the publication of the Electricity Market Reform Delivery Plan.

The investment is needed by 2020 alongside crucial measures to improve the security of electricity supply, which will be made possible now that the Energy Bill has received Royal Assent. This provides investors and industry with the confidence they need to invest in the energy sector and also places a legal obligation on British governments to ensure the UK’s energy generating capacity is maintained while at the same time reducing emissions. This package of measures will support up to a quarter of a million jobs, 200 000 of which are ‘green’ jobs in the renewable energy sector.

There has already been over £31 billion of investment announced in renewable electricity generation projects since 2010, and this package is expected to attract around £40 billion of investment in renewable electricity by 2020. This will provide enough power for 10 million homes while at the same time reducing carbon emissions by around 20 million tonnes – equivalent to 25 per cent of annual household emissions.

Secretary of State for Energy and Climate Change, Edward Davey said:

We have driven the Energy Bill through Parliament on time to send out a clear signal to investors and industry. We have delivered the certainty they need and confirmed Britain’s position as one of the most attractive countries in the world to invest in energy generation.

We are now able to build on the measures already in place to deliver cleaner energy, affordable bills, energy security and the creation of thousands of skilled green jobs across the UK.

A number of accompanying announcements have been made alongside the Electricity Market Reform Delivery Plan today:

The first EMR Delivery Plan sets out the strike prices for renewable technologies under Contracts for Difference (CfD) as well as the analysis underpinning these decisions.

Accompanying the Delivery Plan is a revised version of the CfD, with improvements made to the contract terms to further support the ability of developers to bring forward investment at lower cost to consumers. Together with the strike prices, this package will make the UK market one of the most attractive countries in the world for clean energy developers.

In line with new EU guidelines on competition and to deliver best value for money to the taxpayer, the Government is considering introducing competition for more established low carbon technologies when the CfD regime is introduced. This will be decided in early 2014.

The Government has sent out draft investment contracts to the sixteen renewables projects that have progressed to the next stage of the ‘FID Enabling for Renewables process’. Ten projects have been told that they are provisionally affordable under the budget caps announced on 4 December, but all are able to remain in the process until it is completed, and contracts are awarded, in spring 2014.

A Capacity Market is being introduced which works by providing regular payments to capacity providers so that they are available to and produce energy when capacity is tight, or face penalties.

The Capacity Market will drive investment in generation while ensuring costs are kept down. The Government has today confirmed the level of system security that will be required under the mechanism.

Ofgem has also today approved National Grid’s request to develop new services to ensure we have sufficient capacity in the period before the Capacity Market is operational. This will see existing and mothballed facilities being available to generate power to meet additional demand as necessary.

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Press release, December 19, 2013; Image: DECC