Radical reforms to electricity market pass into law
Today the government’s reforms to stimulate low carbon energy investment and keep the lights on have passed into law.
The Secretary of State has confirmed that:
- The government’s delivery partners for the reformed market - National Grid, the Low Carbon Contracts Company, and the Electricity Settlements Company - have been given powers to go ahead and implement the reforms.
- The first Capacity Market auction will be held in December 2014 for the winter of 2018/19, helping to ensure the lights don’t go out when demand for electricity is high.
- The first allocation of Contracts for Difference is on track to be held in Autumn 2014, with government publishing the final Contract for Difference and Allocation Round notice in the coming weeks.
This is a major milestone that ensures investors have the certainty they need under the new system. It comes after another vote of confidence, when the European Commission granted State Aid approval for the Capacity Market and Contracts for Difference (CFD) on 23 July 2014.
The reforms make the UK one of the most attractive places to invest in energy globally, supporting economic growth and creating jobs. Up to a further £100 billion of investment in the energy sector could be needed through to 2020 with the potential to support up to 250,000 jobs in low carbon electricity.
The new system is designed to bring more competition and encourage private sector investment in electricity generation, by providing long-term Contracts for Difference, which reduce risk for investors; and by introducing a Capacity Market to ensure security of supply.
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 allows for the delivery of Energy Market Reform (EMR), with the first CFD and Capacity Market auctions due before the end of the year.
These reforms will enable the UK to develop a clean, diverse and competitive mix of electricity generation, and will be a better deal for the consumer.
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