The UK's Energy Bill aims to reform the electricity market to enable large-scale investment in low-carbon generation capacity in the UK and deliver security of supply, in a cost-effective way. Making reference to it in the speech, the Queen said, “my Government will propose reform of the electricity market to deliver secure, clean and affordable electricity and ensure prices are fair”.
Key elements of the reform package include:
- a Carbon Price Floor (announced in Budget 2011) aiming to put a price on carbon and provide a stronger incentive to invest in low-carbon generation now;
- the introduction of new long-term contracts (Feed-in Tariff with Contracts for Difference) to provide stable financial incentives to invest in all forms of low-carbon electricity generation. A contract for difference approach has been chosen over a less cost-effective premium feed-in tariff;
- an Emissions Performance Standard (EPS) set at 450g CO2/kWh to reinforce the requirement that no new coal-fired power stations are built without CCS, but also to ensure necessary short-term investment in gas can take place; and
- a Capacity Mechanism, including demand response as well as generation.
Commentating on the forthcoming Energy Bill, a Department of Energy and Climate Change (DECC) spokeswoman said: “This is crucial legislation...reform [ing] the electricity market...in a more cost-effective way, while reaping the economic benefits".
DECC added that the Bill is designed to provide investors with long-term certainty and incentives to invest in low-carbon. By the end of the month DECC says it will publish a draft Energy Bill for pre-legislative scrutiny. It aims to have the bill passed into law by next year, and covering low-carbon projects as early as 2014.
Gaynor Hartnell, Chief Executive of the Renewable Energy Association (REA), said: “We look forward to seeing the details of the Energy Bill. This is of immense importance to project developers in renewables, as the measures it puts in place will eventually replace the Renewables Obligation. Many of the projects in development now are working to a timescale that takes them into the new regime, and they need to know the detail as soon as possible. The new arrangements aim to deliver a stable price for renewable electricity generators, irrespective of what happens to electricity prices. If all works as intended, it should make project development less risky and means that the public pays no more than it needs to for green power.”