Decc reveals plans to overhaul electricity sector
The government is asking for feedback on its plan to reform the UK's electricity market and whether planned support for renewables is adequate
The energy department has published a draft of its electricity market reform (EMR) delivery plan, detailing how mechanisms due to be introduced by the Energy Bill, such as the introduction of contracts for difference (CfDs) and a capacity market, will work in practice.
The draft plan outlines the method the government is applying to set the “strike prices” – the price to be paid for electricity generated from renewable technologies under CfDs – for the period 2014/15 to 2018/19.
Under the proposals in the draft plan offshore wind plants will be paid £155 for every MWh of electricity generated in 2014/15, energy from waste plants will receive £90/MWh and large solar farms will be paid £125/MWh. Coal-fired power stations converted to burn biomass will receive £105/MWh. However, no strike price has been created for new biomass plants, with Decc confirming in the plan that other renewables offer a more cost effective way of cutting carbon emissions.
In publishing the plan, energy secretary Ed Davey claimed: “The strike prices we have set will make the UK market one of the most attractive for developers and investors in renewable energy.
“The new support mechanism for renewables will make it cheaper to deliver low-carbon generation by around £5 billion up to 2030.”
In its consultation on the plan, Decc asks for opinions on the proposed strike prices and whether they will provide sufficient support for renewables.
Initial reactions from the renewables sector have been mixed. RenewableUK, the body for offshore wind and wave power, welcomed the clarity brought by the details. The Renewable Energy Association, however, described the decision not to support new biomass as “misguided”.
The draft EMR plan also sets how the capacity market will operate, including details of the introduction of a “reliability standard” to guide how much capacity is auctioned, based on security of supply. The consultation asks for views on the government’s proposals for setting the standard.
Also included in the draft EMR plan is a series of scenarios outlining the different mix of energy technologies needed to cut carbon emissions from the electricity sector to 200g of CO2 per MWh, 100g/CO2/MWh or 50g/CO2/MWh.
RenewableUK has criticised the scenarios as showing a lack of ambition for the deployment of offshore wind. “Five of the six scenarios assume that offshore wind will not deliver on a shared industry-government target to reduce costs down to £100/MWh by 2020,” commented Maf Smith, the trade body’s deputy chief executive. “This suggests low confidence in the sector and could undermine investment.”
In September 2012, the independent committee on climate change warned the government that that it would fail to meet its legally-binding carbon budgets if emissions from electricity generation in the UK did not fall to 50g/CO2/MWh by 2030.
Decc's consultation on the draft EMR delivery plan will run until 25 September, with the final plan is due to be published in December.