Britain's energy security strategy now fully in place
30 Jun 2014 03:40 PM
Edward Davey has
announced the amount of electricity generation capacity the Government will
procure when it re-introduces a capacity market into the UK later this
year.
The final element of the
Government’s energy security strategy was confirmed
today.
Edward Davey, Secretary of State
for Energy and Climate Change, announced the amount of electricity generation
capacity the Government will procure when it re-introduces a capacity market
into the UK later this year.
Following detailed
recommendations from National Grid, the Government will procure a total of 53.3
GW of electricity generating capacity. This ensures that energy generation
equivalent to seventeen new nuclear power stations will be available. This
equates to more than 80 per cent of peak electricity use in Great Britain today
- and together with renewables and other generation will ensure we have enough
power to meet the demands of homes and businesses in the
future.
The first capacity market
auction will run this December, for delivery in 2018/19, and is similar to
arrangements used in the UK in the decade following electricity privatisation,
which are standard practice in many US states and in some EU
countries.
Edward Davey
said:
“There was a real risk
back in 2010 that an energy crunch would hit Britain in the middle of this
decade and lead to damaging power cuts.
“But the excellent news is
that with today’s announcement we have the final piece of the jigsaw of
our detailed energy security plans and can now say with confidence that we have
defused the ticking time bomb of electricity supply risks we
inherited.
“Britain is a world leader
in energy security - leading in the EU and ahead of every other G7 country.
Today’s announcement - coupled with our record amounts of investment in
renewables and electricity infrastructure, our revival plans for the North Sea
and the most healthy pipeline of investment projects in new generating capacity
and interconnectors ever - means we will remain a world
leader.”
The new Capacity Market is aimed
at addressing Britain’s medium term electricity needs, ensuring power
supplies towards the end of the decade.
National Grid confirmed earlier
this month that it will proceed with new supplementary balancing reserves on
both the demand and supply side target near term electricity supply
needs.
The Government’s
investment strategy in renewables, energy efficiency, better interconnection
and nuclear will help in the short, medium and long terms.
The analysis supporting the
decisions made today has been impartially scrutinised and quality assured by
the Panel of Technical Experts for the enduring regime.
Notes to
editors
- Letter from Edward Davey confirming auction
parameters
- Final independent Panel
of Experts report. The Panel of Technical Experts play an important role in
ensuring that National Grid’s analysis informing the capacity to contract
is fit for purpose. We welcome the independent Panel of Technical
Experts’ report.
- The introduction of the Capacity
Market should have a limited impact on bills. The latest impact assessment
shows that the Capacity Market will lead to a £2 increase in the average
annual domestic electricity bill over the period 2014 to 2030, though the
impact will ultimately depend on the size of any capacity problem. See section 1.5 of the
IA.
- DECC has announced the intention
to procure a total of 53.3GW of capacity for the first capacity year in 2018/19
and that 50.8GW will be auctioned in December of this year, with the balance to
be contracted one year ahead of delivery in 2017.
- This capacity will be contracted
through two competitive auctions; one held in December 2014 and one held in
late 2017. Those successful in the auctions will be required to provide
capacity when the system needs it or face financial penalties. This will help
ensure the lights stay on while also delivering value for money for bill
payers.
- National Grid has also published the informal auction guidelines and
electricity capacity for bidders who wish to participate in the first
auction.
- Final implementation of this
strategy is subject to state aid approval.