16 December 2010
The UK government today announced plans to overhaul the country’s electricity market, introducing feed-in tariffs for clean energy generation and supporting carbon prices.
Details for the reforms are set out in two consultation documents, one on electricity market reform by the Department of Energy and Climate Change and one on the carbon price floor, by the Treasury.
“More than £110 billion [$171 billion] of investment is needed in new power stations and grid upgrades over the next decade, that’s double the rate of the last ten years. Put simply, the current market is not fit to deliver this,” said Energy and Climate Change Secretary Chris Huhne.
The proposed shake up includes:
•A carbon prices support mechanism, using the Climate Change Levy and fuel duties to tax fossil fuels used to generate electricity at rates based on their carbon content.
•Establishing a long-term ‘contract for difference’ for low carbon power generation. This feed-in tariff would see generators receive top-up payments if wholesale power prices are low, but money would be ‘clawed back’ once the cost of low-carbon electricity generation drops below wholesale prices. However, the consultation also sets out an alternative ‘premium’ feed-in tariff.
•Incentives for demand-reduction measures and to construct back-up power plants.
•An emissions performance standard which would ensure no coal plants can be built without carbon capture and storage.
Jess McCabe
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