British Energy Minister Amber Rudd has signalled a ‘semi-U-turn’ in energy policy to improve security of supply and to ensure the lights stay on.
She said the changes will tackle the’ legacy of under-investment and deliver an energy infrastructure fit for the 21st century.”
Following a detailed review, a package of reforms to the Capacity Market has been unveiled. They will improve the system used to secure reliable sources of electricity capacity, tackle decades of underinvestment and safeguard the future security of our energy supply for generations to come.
The reforms set out Govt. plans to buy more electricity capacity and buy it earlier – encouraging more investment in the UK energy system.
This will mean new energy infrastructure can be built, in particular new gas fired power stations, safeguarding energy supply and avoiding spikes in energy costs.
In the shorter term, the start of the Capacity Market will be brought forward one year to help give both consumers and the energy industry greater peace of mind for the coming winters. Tougher action will also be taken on companies which go back on their Capacity Market contracts, locking industry in to the deals they commit to.
Rudd, Energy and Climate Change Secretary, said: “Ensuring that our families and businesses have secure energy supplies they can rely on now and in the future is not negotiable and I’ll take no risks with this.
“The Capacity Market has driven down costs and secured energy at the lowest possible price for bill-payers, but I’m taking further action to tackle the legacy of under-investment and ensure our country’s long-term energy security. By buying more capacity earlier we will protect consumers and businesses from avoidable spikes in energy costs.
“We’re also sending a clear signal to investors that will encourage the secure and clean energy sources we need to come forward – such as gas and interconnectors – as part of our long-term plan to build a system of energy infrastructure fit the 21st century.
“Working closely with DEFRA and OFGEM, we will look at what further action can be taken on diesel – removing any incentives that other energy types do not enjoy.”
A review by Rudd’s Department (DECC) conclude that to improve energy margins, get the investment needed in Brtish energy infrastructure and encourage new plant, including new gas, concluded that more capacity should be procured. The exact amount will be determined in due course and procured each year on the basis of a recommendation from National Grid.
Rudd added: “We have launched a new consultation that will look at bringing forward the Capacity Market by one year. Under these plans an early Capacity Auction would take place in January 2017 for delivery in winter 2017/18. The consultation also includes details on tougher penalties for companies that fail to deliver their Capacity Market contracts”
This consultation will close on 1 April 2016 and can be viewed in detail at gov.uk
However, the statement met with a scathing response from Fergus Ewing, Scottish Energy Minister, whose response is summarised thus: “Ye were telt!”
He said: “In this statement, the UK Government is admitting its abject failure to keep power stations open and protect energy security.
“We have called repeatedly over many years for action to protect baseload and backup capacity, so these proposals to reform the Capacity Market vindicate the Scottish Government’s position.
“In rushing out new measures to plug the capacity gap, the Secretary of State (Rudd) is belatedly addressing the seriousness of the UK’s energy crunch and acknowledging the market has not delivered.
“Support to retain existing gas-fired capacity and build new plants is welcome, but the unfortunate reality is that higher transmission charges in Scotland mean no new stations would be built here as the costs of using the grid are higher than in England.
“This discriminatory regime means Scotland cannot attract new thermal generation when in competition with alternative sites in England, yet the UK Government has shown little understanding and no willingness to tackle this issue.”
Hector Grant, Chief Executive of the Scottish Energy Association, commented: “The Scottish Energy Association is delighted that the Westminster government has finally taken on board the recommendations of our members and other organisations involved in the energy industry, to address the issue of long term investment in the energy infrastructure.
“We will however have to wait and see if this announcement will in fact deal with the capacity needs, heat demand and price stability that consumers and industry need. The Scottish market has additional concerns and ‘hidden’ costs which will inevitably impact the expected outcomes.”
See also: Power Scotland Conference; 10 March 2016, Glasgow