UK energy bill outlines electricity market reform

By Luke Geiver | May 30, 2012

The U.K.’s Department of Energy and Climate Change (DECC) has released a draft of an energy bill that could clarify the future of biomass energy in the country. “I am confident that measures contained in this Energy Bill will enable us to keep the lights on, bills down and air clean,” said Edward Davey, secretary of state for DECC. The bill contains several strategies that will contribute to the country’s clean energy future, including the explanation of the Electricity Market Reform (EMR), a multi-level plan the DECC has created to phase out fossil fuel energy production and increase use of lower-carbon sources. According to the DECC, roughly one-fifth of existing capacity in the U.K. is expected to close over the next decade, while demand for electricity will double by 2050.

“It is imperative that the right mechanisms are in place to attract the £110 billion investment that is needed to ensure the U.K. can meet its requirements for secure and flexible supplies of electricity at affordable prices,” Davey said in his written ministerial statement on the release of the energy bill. To ensure the country can meet the demand for electricity at the same time large-scale energy production facilities close, DECC has created a number of provisions to offset the cost for renewable energy production. The drafted energy bill explains Contracts for Difference (CfDs) as part of a feed-in tariff program as long-term instruments to provide stable and predictable incentives for companies to invest in renewable energy. Davey said that CfDs are more affordable than alternative incentives.

In addition to CfDs, the EMR will benefit from a transitional program for renewable energy that will keep current investments in renewable energy production stable as the country moves away from the Renewables Obligation in 2017, according to Daveys.

The Renewable Energy Association (REA) of the U.K. issued comments on the drafted bill the same day it was released. “The REA has stressed the importance of ensuring that the electricity market remains accessible to small- and mid-scale renewable investors and generators,” said Gaynor Hartnell, REA’s chief executive. For Hartnell, the role of small- and mid-scale energy producers will remain important for future investment and electricity generation in the country. She added that a balance needs to be struck between the DECC and the renewable energy production industry to ensure future capacity, and to clarify when certain constraints on energy production technologies related to emissions or other factors might be implemented.

DECC is currently taking written inquiries and other commentary on the drafted bill and plans to report on the findings in late July. To submit comments to the DECC, click here.

To view the energy bill in its entirety, click here