The Imperial State Crown is held on a cushion to be presented to the Queen in the Palace of Westminster during the State Opening of Parliament.

Queen's Speech sets out electricity market reform

The UK Government’s proposal to reform the electricity market, set out in the Queen’s Speech, will enable large-scale investment in low-carbon power and deliver security of supply.

“My Government will propose reform of the electricity market to deliver secure, clean and affordable electricity and ensure prices are fair,” the Queen said today.

The reforms will be laid out in the Energy Bill, scheduled for publication on May 22.

The Energy Bill will reform the electricity market to introduce long-term contracts that pay a steady rate of return for energy over the lifetime of new low-carbon generators. The reforms aim to overcome the high capital cost of building nuclear power plants or offshore wind.

The Government also claims the move will reduce expected rises in energy bills by around £40 by 2030, so that the average bill will increase by £160 instead of the £200 rise predicted if the market were left as it is.

But MPs have suggested the system will work for nuclear but not for low carbon power such as offshore wind, and warned the plans amount to a subsidy for new nuclear reactors, something the Government has pledged not to provide.

And despite the planned reforms, efforts to create a nuclear renaissance have stalled, with E.ON and RWE npower pulling out of a venture in March to develop new power plants at Wylfa in North Wales and Oldbury-on-Severn, Gloucestershire.

The Energy Bill will also introduce an emissions performance standard to prevent construction of new coal plants which produce too much carbon dioxide.

Dr Colin Brown, Director of Engineering at the Institution of Mechanical Engineers, said:  “The confirmation of a bill to introduce electricity market reform is welcome and long overdue. With the UK’s nuclear programme in disarray, wind power under increasing pressure and uncertainty over Feed-In Tariffs squeezing the UK solar industry, electricity market reform is the Government’s best chance to ensure a secure, clean and affordable energy supply in the coming decades. They need to get it right and they need to get it done.”

The Institution of Engineering and Technology said in a statement before the speech that if the UK was to keep its environmental commitments, then electricity market reform needed to quickly facilitate investment in new large scale generation, while enabling transition to a low carbon energy system over the next ten years.

Simon Harrison of the IET said: “There needs to be a great deal of care taken in the final design of the Energy Bill. Given E.On and RWE’s planned disinvestment in Horizon there is even more need to judge nuclear support carefully so that the interests of consumers and nuclear project developers are properly balanced.  However there does need to be sufficient clarity soon to move gas and renewables build forward quickly.”

Further information:

Read the IET’s briefing, UK Electricity Market Reform: The Engineering Perspective.

Read more on the Electricity Market Reform.

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