A draft plan for energy infrastructure will be met with “dismay” by industrial consumers, according to the EEF.
Secretary of State for Energy and Climate Change Ed Davey has unveiled the government’s draft Electricity Market Reform Delivery Plan, published today for consultation, which provides detail on the support mechanism – long-term Contracts for Difference – and draft strike prices for renewables investors.
The government hopes the move will give investors further certainty today of how it will support up to £110bn of investment in new electricity infrastructure by 2020.
But EEF head of Business Environment Policy, Roger Salomone, said: “Today's announcement will get a mixed response from manufacturers. Would-be investors are gradually getting the details they need to take forward projects.
“But industrial consumers will be dismayed that there is still no concrete plan for moving to a competitive market for low-carbon electricity. What’s urgently needed is a clear timetable setting out when technologies in receipt of significant subsidies, funded by the consumer, will stand on their own two feet.”
Further details in the delivery plan include information on how the Contracts for Difference support mechanism will work by removing commercial risks, such as wholesale price risk.
The methodology behind the level of draft strike prices set last month for renewable electricity, including onshore and offshore wind, tidal, wave, biomass conversion and large solar projects from 2014-19, will also be set out in the plan.The methodology government will use in running a Capacity Market will also be detailed.
The draft also features the latest assessment of the price and bill impacts of electricity market reform. The changes are expected to reduce annual household electricity bills by an average of £62 or 9 per cent over the period 2016 to 2030 (in real 2012 prices), compared to meeting the same policy goals using existing policy instruments.
It also includes a series of scenarios for technology deployment and decarbonisation from now to 2030, though the scenarios outlined in the delivery plan are not targets as the exact generation mix will be influenced by how individual technologies develop in the coming decade.
Davey said: “No other sector is equal in scale to the British power market, in terms of the opportunity that it offers to investors, and the scale of the infrastructure challenge.
“The delivery plan will provide investors with further certainty of government’s intent, so that they can get on and make crucial investment decisions that are supporting green jobs and growth.
“The strike prices we have set will make the UK market one of the most attractive for developers and investors in renewable energy. It is necessary to support technologies in the early stages of their development, but we are looking all the time at how we reduce the costs for consumers."
Davey added: “The new support mechanism we are introducing for renewables will make it cheaper to deliver low-carbon generation by around £5bn up to 2030.
“This will put the UK one step ahead in the global race to develop clean technologies, and will support up to 250,000 jobs across the energy sector.
“As well as being good for green jobs and growth, what we are doing will protect our environment. The new strike prices will mean that renewables can contribute more than 30 per cent of our power mix by 2020, putting us on track to seeing significant decarbonisation of the power sector by 2030 and meeting our wider climate targets.”