Up to £110bn of private-sector investment in the electricity industry is set to be unlocked following the publication of the Electricity Market Reform Delivery Plan, the Department for Energy and Climate Change claims.
Now that the Energy Act has received Royal Assent investors and industry will have the confidence they need to invest in the energy sector, the government hopes. The Act also places a legal obligation on British governments to ensure the UK’s energy generating capacity is maintained while at the same time reducing emissions. This package of measures will support up to a quarter of a million jobs, 200 000 of which are ‘green’ jobs in the renewable energy sector.
According to a statement by the DECC, there has already been over £31bn of investment announced in renewable electricity generation projects since 2010, and delivery plan is expected to attract around £40bn of investment in renewable electricity by 2020. That would provide enough power for 10 million homes while at the same time reducing carbon emissions by around 20 million tonnes – equivalent to 25% of annual household emissions.
Energy and Climate Change Secretary Ed Davey (pictured) said: “We have driven the Energy Bill through Parliament on time to send out a clear signal to investors and industry. We have delivered the certainty they need and confirmed Britain’s position as one of the most attractive countries in the world to invest in energy generation.
“We are now able to build on the measures already in place to deliver cleaner energy, affordable bills, energy security and the creation of thousands of skilled green jobs across the UK.”
The first delivery plan sets out the strike prices for renewable technologies under Contracts for Difference (CfD), as well as the analysis underpinning these decisions. Accompanying the plan is a revised version of the CfD, with improvements made to the contract terms to support the ability of developers to bring forward investment at lower cost to consumers. Together with the strike prices, the package will make the UK market one of the most attractive countries in the world for clean energy developers.
In line with new EU guidelines on competition, and to deliver best value for money to the taxpayer, the government is considering introducing competition for more established low carbon technologies when the CfD regime is introduced. That will be decided early next year.
The government has sent out draft investment contracts to the 16 renewables projects that have progressed to the next stage of the ‘FID Enabling for Renewables’ process. Of those, 10 have been told that they are provisionally affordable under the budget caps announced on 4 December, but all are able to remain in the process until it is completed and contracts are awarded in the spring.
A Capacity Market is being introduced, which works by providing regular payments to capacity providers so that they are available to produce energy when capacity is tight, or face penalties. The Capacity Market will drive investment in generation while ensuring costs are kept down. The government has also confirmed the level of system security that will be required under the mechanism. In addition, Ofgem has approved National Grid’s request to develop new services to ensure we have sufficient capacity in the period before the Capacity Market is operational. That will see existing and mothballed facilities being available to generate power to meet additional demand as necessary.