Encouraging investment in our electricity system
23 Jun 2014 03:51 PM
Today the
Government’s overhaul of the electricity market pushes forward, with
secondary legislation for the Electricity Market Reform (EMR) programme laid in
Parliament.
Today the Government’s
overhaul of the electricity market pushes forward, with secondary legislation
for the Electricity Market Reform (EMR) programme laid in Parliament. This
major milestone means the programme is one step closer to being passed into
law, giving industry the certainty they need to invest under the new
system.
Reforming the system will
encourage private sector investment in low-carbon electricity generation, and
help to keep the lights on at the least cost to consumers. Household
electricity bills are estimated to be 6% (£41) lower on average every
year up to 2030 under EMR compared to reducing emissions through existing
policies.
Two new mechanisms are being
introduced to incentivise this much needed investment in our energy
infrastructure:
- Contracts for Difference (CfDs)
provide long-term price certainty to low-carbon projects, reducing risk for
investors. This means capital costs are lower and in turn, costs to consumers
are lower.
- The Capacity Market provides a
regular payment to reliable forms of energy generation, in return for
generating capacity being made available when the system is
tight.
The new arrangements will
further strengthen the UK’s position as one of the most attractive places
to invest in energy globally, supporting economic growth and job creation. EMR
will help to bring forward an estimated £100 billion of further
investment in the energy sector through to 2020, with the potential to support
up to 250,000 jobs in low carbon electricity. The reforms are already starting
to deliver this investment, with up to £12 billion of private sector
investment to be provided as a result of the early contracts that were awarded
to renewable electricity projects in April. Further investment will come
forward when the first CfDs under the new system are allocated, and the first
Capacity Market auction is run, later this year.
Achieving the reforms will
enable the UK to develop a clean, diverse and competitive mix of electricity
generation – ensuring that the lights will stay on and we have secure,
low carbon energy for years to come.
Notes to
Editors
- The Government took powers to
implement the reforms through the Energy Act 2013, which became law in December
last year. Approval of the secondary legislation will allow for the delivery of
EMR, with the first CFD allocation and capacity auction due before the end of
the year.
- As well as the secondary
legislation laid in Parliament for scrutiny, the Government is also publishing
a number of documents which will provide detail on the reforms to industry and
stakeholders. This includes five Government responses to EMR consultations; an
updated CFD Allocation Framework, which sets out the technical rules and
procedures which will apply in the first CFD allocation round; and Implementing
Electricity Market Reform, a document which provides a comprehensive overview
of the reforms as the legislation comes into force