Britain moves to promote low carbon power

Reno News.Net Tuesday 22nd May, 2012

LONDON - Britain is working on a new legislation that will reform the electricity market in the country to incentivize renewable energy, nuclear power and carbon capture and storage and attract around 110 billion pounds investments electricity generation and transmission.

The long-awaited Electricity Market Reform (EMR) bill is intended to deliver the UK's climate change goals, at least cost, while ensuring a diverse mix of generating capacity, Ed Davey, Secretary of State for Energy and Climate Change, told reporters Tuesday.

"We're trying to create a system where low-carbon power can compete in the market," Davey said.

Over the next decade around one-fifth of existing power-generating capacity will come off-line, raising fears for blackouts across the country, the UK Department of Energy and Climate Change said.

The legislation is designed to encourage a balanced portfolio of renewables, new nuclear and carbon capture and storage (CCS), and to ensure that these technologies can compete fairly in the marketplace.

The key change in the proposed reforms coming after two decades is the adoption of long-term contracts that pay a steady rate of return for energy over the lifetime of new low-carbon generators, to overcome the high capital cost of building nuclear power plants or offshore wind.

The 'contracts for difference' will see the government sets minimum strike prices which will be paid for each low-carbon generating technology.

However, if wholesale electricity prices rise above that strike price, generators will have to pay the difference back to the government, which will pass it on to consumers.

These strike prices will be based upon advice and economic analysis carried out by National Grid, the UK's grid operator, and will be published in 2013.

They will come into force for projects from 2014, although the existing support mechanism for renewables the Renewables Obligation, whereby utilities have to source an annually-increasing proportion of their electricity from renewable sources or face a fine will remain in place until 2017.

The bill will also introduce a capacity market, ensuring that there is sufficient base load capacity available to ensure continuity of supply.

Director of energy markets and networks at the Department of Energy and Climate Change (DECC), Jonathan Brearley admits more thinking needs to be done "before its design is finalised."

Projected by DECC modelling to reduce consumers' bills by 4% compared with business-as-usual, the proposed legislation is intended to spur some 110 billion pounds investment in electricity generation and transmission, addressing recent under-investment caused in large part by numerous changes by governments to the existing support mechanisms.

"We need to secure investment at twice the rate in this decade that we managed in the last decade," Energy Minister Charles Hendry told media.

Davey denied accusations from green groups that the legislation was tilted in favour of nuclear energy generation.

The Scottish Government is also opposed to new nuclear power and can effectively block any UK plan for new plants north of the border.

Stressing concerns, Scottish Energy Minister Fergus Ewing said Scotland must be a partner in decision making, not a consultee.