Queen’s speech promises reform of UK electricity market

Posted at May 11, 2012 » By : » Categories : News » Comments Off on Queen’s speech promises reform of UK electricity market

The Queen’s speech yesterday committed the UK government to introduce its Energy Bill, which promises to reform the electricity market to “deliver secure, clean and affordable electricity” while keeping prices “fair”.

The bill is supposed to support large-scale investment in low-carbon generation capacity to ensure that the lights stay in a cost-effective way.
The legislation will put in place institutional and market arrangements to support and encourage the £110 billion investment needed in the country’s energy infrastructure over the next decade.

Specifically, the bill will introduce a feed-in tariff with Contracts for Difference (FiT-CfD) to support low-carbon generation, providing certainty of revenues and making investment in clean energy more attractive. Meanwhile, a capacity mechanism will ensure that there is sufficient reliable and diverse capacity to meet demand.

An Emissions Performance Standard (EPS) will also be introduced to stop the construction of new coal plants that emit more than 450g/kWh.

The bill will also set up an independent, industry-financed regulator for the nuclear sector, in the form of the Office for Nuclear Regulation.
A spokeswoman for the Department of Energy and Climate Change (DECC) said the government would publish a draft bill, with the legislation reaching the statute book by 2013.

“This is crucial legislation,” she said. “It is designed to provide investors with long-term certainty and incentives to invest in low-carbon.”
The move has been largely welcomed after press reports last week that the electricity market reform (EMR) would be left out of the Queen’s speech.

“The Prime Minister must honour his pledge to lead ‘the greenest Government ever’ and seize this once-in-a-generation opportunity to make our power system cleaner, more affordable and less reliant on increasingly imported fossil fuels,” urged Friends of the Earth’s executive director Andy Atkins.

The business lobby group the CBI and The Climate Group have also welcomed the news as a potential boost to growth.

“[The] announcements are an important stepping stone,” commented director-general John Cridland. “Business investment in low-carbon will only happen when the detailed market framework is in place.”

Mark Kenber, CEO of The Climate Group, says the moves are an important – albeit belated – step on the way to a low-carbon future.

“This is a positive step after two years of lack of direction on the environment and the low carbon economy,” he said. “We cannot afford any more delays in kick-starting the much-vaunted green investment programme without running the danger of leaving the UK lagging further behind in the global market place.”

Network provider National Grid was positive too about the new mechanisms of support, with which it is likely to be deeply involved.

“National Grid is well placed and has the expertise to deliver the mechanisms outlined in the technical paper,” says UK executive director Nick Winser. “There is a lot of work to do to ensure we are ready to deliver these mechanisms and we remain committed to playing our part.”

Green energy industry groups RenewableUK and the Renewable Energy Association (REA) also welcomed the inclusion of the Energy Bill as a means of securing support and investment.

“This is of immense importance to project developers in renewables, as the measures it puts in place will eventually replace the Renewables Obligation (RO),” says chief executive of the REA Gaynor Hartnell. “If all works as intended, it should make project development less risky and means that the public pays no more than it needs to for green power.”

But Green MP Caroline Lucas accuses the government of squandering  “a vital opportunity to put action to tackle climate change and the growing environmental crisis at the top of its legislative agenda”.

“In the face of mounting scientific concern about the urgency of the threat we face from climate change, the deafening silence from this government is unforgiveable,” she adds.

She calls the EMR “deeply flawed” and legislation that without amendment will risk locking the UK into a “high-carbon, high cost and gas dependent future”.

The Queen’s speech also laid out legislation that will see the establishment of the Green Investment Bank.

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