Government’s electricity market reform plans need clarity, say stakeholders


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15 July 2011

 

Energy and Climate Secretary Chris Huhne have been largely welcomed by stakeholders, while calling for greater clarity.
Among the measures outlined in the White Paper, the new long-term contracts for energy generators, based on a ‘contract for difference feed in tariff’, index-linked to fuel price, has been welcomed by the Carbon Capture and Storage Association (CCSA).
The CCSA says the mechanism will support carbon capture and storage installation, which will need to fitted to at least 20-30GW of fossil-fuel power generation capacity by 2030 to reach the UK’s aim of decarbonising its power sector.
"Delivering that amount of CCS capacity by 2030 is challenging but achievable and industry will rely on this mechanism to deliver a bankable incentive," says Jeff Chapman, chief executive of the CCSA.
The Institution of Civil Engineers also gave the EMR proposals a generally positive reception for trying to give investors more certainty.
However, director general Tom Foulkes warned:?"It requires a careful balance between reforming the market to drive investment in a diverse energy mix, to which end the guaranteed price for electricity should be a significant incentive, and equally important engineering measures such as demand management and regulatory reform which will ensure that industry has the capacity – and confidence – to deliver such a massive programme of work."
Business lobby group the CBI agrees that the measures are a step in the right directions, but says there is still much to be done to ensure that the necessary level of investment is made in the UK’s energy infrastructure.
"The hardest work is still to come," says director-general John Cridland. "There is much to do if we are to secure the £200 billion of essential investment needed in our energy infrastructure."
The CBI called for a decision on the level of the new feed-in tariffs and the capacity mechanism by the end of the year.
"Everyone wants to make our energy infrastructure more secure and sustainable for the future, but businesses cannot be expected to write a blank cheque. The Government still needs to spell out what it thinks the final bill for all of its electricity market reforms will be," commented Cridland.
Energy supplier RWE npower said the EMR is "encouraging" but does not yet provide enough clarity for investors or customers.
"The Government has shown today that they have grasped the scale of the energy challenge in this country and the urgency with which this challenge must be tackled," says CEO Volker Beckers. "However, it is vital that both customers and investors can see where their money is going. The scale of investment required in the UK is unprecedented: £200 Billion by 2020 is equivalent to £8,000 for every household in the country."
Consumer group Which? agrees that while the proposals are moving in the right direction for domestic users, there does need to be more detail on how much the reform will ultimately cost.
"We support the emphasis on affordability and attempts to tackle increased costs, but the Government must be as clear as possible with consumers about how far prices will rise in comparison to today’s energy bills," commented Which? executive director Richard Lloyd.