What the energy industry wants to see from UK electricity market reform

Chris Huhne, the UK energy secretary, will tomorrow announce the details and scope of the government’s consultation on electricity market reform (EMR). The bill will come before parliament in the spring, but tomorrow’s announcement is expected to give some indications of the direction of government thought on certain key issues.

Huhne will be answering your EMR-related questions on this blog next week – email energysource@ft.com by Friday, December 17th to pose your question. Meanwhile, here is what the energy industry wants to see ahead of the tomorrow’s release:

Sara Vaughan, head of UK policy at Eon: Low-carbon obligation

We need clarity from the government on a future market framework that will enable us to invest in low carbon generation. We favour some sort of low carbon obligation (LCO) or other similar measure that incentivises clean power over cheap power by requiring suppliers to contract for low carbon capacity for a given percentage of their demand.

Nick Molho, head of energy policy at WWF: Emissions performance standard and CCS

An emissions performance standard was a key pre-election pledge from [David] Cameron, and WWF strongly believes this should remain a priority for the government. This is a vital component in building a future where we gain most of our energy needs from renewables, as opposed to polluting unabated coal and gas stations.

Any financial incentive scheme that is introduced as a result of the EMR should focus exclusively on new and emerging low-carbon technologies, especially marine renewables, as opposed to technologies such as nuclear that have been around for decades, do not provide any economic benefits to the UK and represent a significant environmental hazard to the UK.

Ronan O’Regan, director, PwC renewables and clean tech: New nuclear with balanced incentives

The underlying theme is how to get new nuclear power stations built in the UK. But we also need to ensure that we don’t inadvertently favour one technology over another. If it turns out that the reforms make nuclear wholly bankable, you could end up finding that capital shifts away from offshore wind.

Bill Weil, partner, Ludgate Environmental Fund: Clarity on feed-in tariffs

We need to hear what the plan is on feed-in tariffs. When are the levels, what could trigger a review of those levels, and what is the timeline? What we don’t want is the uncertainty of wondering whether the stairs are going to fall out from under us.

Juliet Davenport, CEO, Good Energy (100% renewable electricity provider): Zero-carbon aim and secure carbon price

Encouraging low carbon solutions is not enough. It needs to be aiming for a zero carbon energy market with a transparent support mechanism for all low-carbon technologies through the feed-in tariff. It also needs to ensure storage and demand side solutions are included in any capacity support mechanism.  And this must be underpinned by a long-term, secure carbon price.

Jeff Chapman, chairman, Carbon Capture and Storage Association: Premium tariff for CCS

Proposals to reward generators of low carbon electricity with a premium price is the right way forward and CCS must be included in this tariff.  CCS will deliver low carbon electricity from fossil fuel and gives us flexibility in electricity generation to complement renewable technologies, a reformed electricity market should be designed to recompense all generators of low carbon electricity and reward fossil fuel plants for their flexibility.

Chris Stubbs, director at WSP Environment & Energy (consultancy): Gradual carbon floor price

It is crucial that the carbon floor price is introduced gradually so that existing high carbon plants aren’t suddenly hit with a mega bill. The gradual introduction should be set out years in advance of the increases so that generators and investors can plan ahead. The government must establish a clear route map and stick to it, clear identifying the stages at which the carbon price will go up and by exactly how much.

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