The Government launched its consultation on the Electricity Market Reform (EMR), as part of the most dramatic shake up of the electricity market since the deregulation in the 1980’s.
The wide ranging proposals are set to recommend the phasing out of Renewable Obligation Certificates and a new type of support mechanism for all forms of low-carbon electricity, including nuclear and carbon capture and storage.
RenewableUK, the country’s leading renewable energy trade association, has welcomed the general direction of the proposals but has warned that changing parts of the existing model which are working will hit investor confidence.
Dr. Gordon Edge, RenewableUK Director of Policy, said: "Major investment is required in the UK’s electricity sector, both to replace generating capacity that is reaching the end of its life and to meet our targets for renewables and carbon emission reductions. In the long term, the cost of doing nothing to the country and to consumers will be much greater than the cost of low carbon measures.
"However, we must also bear in mind that the Renewables Obligation has turned the UK into an offshore wind farm powerhouse, and brought forward 20,000 megawatts of wind turbines applications onshore. We shouldn’t be looking to solve a problem that doesn’t exist, or take a leap in the dark which might undermine investment."
The Government proposals will include: a carbon floor price, making emissions from conventional power stations more expensive and level the energy price playing field, which RenewableUK welcomes; emissions performance standard, which should deliver a fuller decarbonisation of the UK power sector by 2030, and is a logical ‘stick’ to go alongside the low carbon incentive ‘carrots’; capacity mechanism, justifying investment in low load factor generators such as open-cycle gas turbines (‘peaking plant’), which may help to integrate large quantities of variable renewable generation, but needs very careful design; and finally, low-carbon support mechanism, in the form of a so called ‘contract for differences’, which is a relatively untried system and which may have key practical difficulties in implementation.
Maria McCaffery, RenewableUK Chief Executive, said: "There is no doubt that in terms of cost to the consumer, reform is the best option. Various studies have shown that continuing our use of fossil fuels will eventually cost far more than building a low carbon economy, even at a projected cost of £200 billion. While our preference would be to retain the current successful support mechanism, we need now to consider the details of the proposals to see if they are workable, and if so make sure that any transition to a new model is completed with a minimum of disruption."