Electricity Market Reform Delivery Plan published

19 December 2013
By Edd Gent
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The Government has published its Electricity Market Reform Delivery Plan

The Government has published its Electricity Market Reform Delivery Plan

Draft investment contracts have been sent to 16 renewables projects after the Government published its Electricity Market Reform Delivery Plan.

Up to £110bn of private sector investment in electricity supply is needed by 2020 alongside measures to improve the security of electricity supply, said the Government, which has been made possible after the Energy Bill received Royal Assent yesterday.

Through the Electricity Market Reform package, the Government is introducing contracts for difference (CFDs), which are fixed-price long-term contracts, to support the development of low-carbon electricity generation.

Contracts for the projects are set to be awarded next spring, with schemes including onshore and offshore wind, and biomass conversion from applicants such as Drax Power, Dong Energy Wind Power and Dudgeon Offshore Wind.

Secretary of State for Energy and Climate Change, Edward Davey said: "We have driven the Energy Bill through Parliament on time to send out a clear signal to investors and industry. We have delivered the certainty they need and confirmed Britain's position as one of the most attractive countries in the world to invest in energy generation.

"We are now able to build on the measures already in place to deliver cleaner energy, affordable bills, energy security and the creation of thousands of skilled green jobs across the UK."

The Government is delivering its plans on time and many contracts are now coming forward to be considered, Davey said.

"Some applicants will be disappointed because we cannot afford every one. But we are moving to early competition, which is a sign that investment is growing at high levels and the cost of green energy is coming down."

Yorkshire-based Drax applied for investment contracts for the conversion of two of its generating units to burn sustainable biomass in place of coal.

Dorothy Thompson, chief executive of Drax, said: "We are pleased with the news that the Government has provisionally ranked our two projects highest amongst qualifying projects for early CFDs. This reflects the deliverability and cost-effectiveness of this important renewable technology.

"We will now participate in the next stages of this process, which will conclude with the award of investment contracts in spring 2014."

Renewable Energy Association chief executive Nina Skorupska said: "The complexity of electricity market reform has been well documented. It has also raised doubts that Government would be able to stick to schedule, especially given the recent politicisation of energy policy.

"Government, and especially the Department for Energy and Climate Change, is therefore to be congratulated on succeeding in bringing the Energy Act in on time. This is a major step forward for realising the huge jobs and growth potential in home-grown, climate-friendly renewable power."

Meanwhile, Ofgem has approved additional measures that will be available for National Grid to use to manage tighter electricity supplies from next winter, including using mothballed plants.

Ofgem said earlier this year that electricity margins could tighten in 2015/16 to between around 2 per cent and 5 per cent, depending on the outlook for demand.

"Therefore, Ofgem considers it prudent to provide National Grid with the option of extra tools to help it balance the system against tighter electricity supplies from winter 2014/15," said a statement.

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