Investors have received further details as to how the government is planning to support new infrastructure through the Energy Bill.
The draft Electricity Market Reform Delivery Plan, which was published for consultation yesterday, provides detail on the support mechanism (long-term Contracts for Difference), and the new draft strike prices for investors in renewable energy.
It is hoped these two measures will help to incentivise around £110 billion of investment in new electricity infrastructure by the year 2020.
Putting the British power market ‘one step ahead’
Speaking about the draft Delivery Plan, secretary of state Ed Davey commented that no other sector is equal in scale to the British power market when it comes to the opportunity it offers to investors, as well as 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,” he said.
“The strike prices we have set will make the UK market one of the most attractive for developers and investors in renewable energy.”
He emphasised the importance of supporting technologies in the early stages of their development, but added that the government is constantly looking at how it can cut costs for consumers.
“The new support mechanism we are introducing for renewables will make it cheaper to deliver low-carbon generation by around £5 billion up to 2030,” Davey said.
According to the minister, this will put the UK “one step ahead” of other countries in the global race to develop clean technologies. It will also support up to 250,000 jobs across the energy sector.
Davey also highlighted the positive impact the measures will have on the environment. The new strike prices will mean that renewables can contribute over 30 per cent of the UK’s power mix by the year 2030, he noted.
Bringing the UK closer to decarbonisation
It is intended to put the nation on track to significant decarbonisation of the power sector by the year 2030, while also helping to work towards wider climate change targets.
Included in the Delivery plan are more details on the Contracts for Difference (CfDs) mechanism, which will support investors in low carbon energy through the removal of commercial risks like wholesale price risk. CfDs will make it cheaper to deliver low carbon generation by around £5 billion up to 2020 as they will see the cost of capital slashed more than it can be in existing schemes.
In addition, the plan will include the methodology behind the draft level of strike prices when it comes to renewable energy.
It was also revealed that when it comes to running a Capacity Market, the government is planning on using a reliability standard to guide how much capacity is auctioned in the Capacity Market next year, for delivery in 2018-19.
Consumers will also be eager to find out about the latest assessment of the price and impact on the bill of Electricity Market Reform, which is expected to cut annual household bills by an average of £62 – or nine per cent – between 2016 and 2030, compared to if the same policy goals were to be met using existing measures.