The final element of the Government’s energy security strategy was confirmed today.
Edward Davey, Secretary of State for Energy and Climate Change, announced the amount of electricity generation capacity the Government will procure when it re-introduces a capacity market into the UK later this year.
Following detailed recommendations from National Grid, the Government will procure a total of 53.3 GW of electricity generating capacity. This ensures that energy generation equivalent to seventeen new nuclear power stations will be available. This equates to more than 80 per cent of peak electricity use in Great Britain today - and together with renewables and other generation will ensure we have enough power to meet the demands of homes and businesses in the future.
The first capacity market auction will run this December, for delivery in 2018/19, and is similar to arrangements used in the UK in the decade following electricity privatisation, which are standard practice in many US states and in some EU countries.
Edward Davey said:
“There was a real risk back in 2010 that an energy crunch would hit Britain in the middle of this decade and lead to damaging power cuts.
“But the excellent news is that with today’s announcement we have the final piece of the jigsaw of our detailed energy security plans and can now say with confidence that we have defused the ticking time bomb of electricity supply risks we inherited.
“Britain is a world leader in energy security - leading in the EU and ahead of every other G7 country. Today’s announcement - coupled with our record amounts of investment in renewables and electricity infrastructure, our revival plans for the North Sea and the most healthy pipeline of investment projects in new generating capacity and interconnectors ever - means we will remain a world leader.”
The new Capacity Market is aimed at addressing Britain’s medium term electricity needs, ensuring power supplies towards the end of the decade.
National Grid confirmed earlier this month that it will proceed with new supplementary balancing reserves on both the demand and supply side target near term electricity supply needs.
The Government’s investment strategy in renewables, energy efficiency, better interconnection and nuclear will help in the short, medium and long terms.
The analysis supporting the decisions made today has been impartially scrutinised and quality assured by the Panel of Technical Experts for the enduring regime.
Notes to editors
- Letter from Edward Davey confirming auction parameters
Final independent Panel of Experts report. The Panel of Technical Experts play an important role in ensuring that National Grid’s analysis informing the capacity to contract is fit for purpose. We welcome the independent Panel of Technical Experts’ report.
- The introduction of the Capacity Market should have a limited impact on bills. The latest impact assessment shows that the Capacity Market will lead to a £2 increase in the average annual domestic electricity bill over the period 2014 to 2030, though the impact will ultimately depend on the size of any capacity problem. See section 1.5 of the IA.
- DECC has announced the intention to procure a total of 53.3GW of capacity for the first capacity year in 2018/19 and that 50.8GW will be auctioned in December of this year, with the balance to be contracted one year ahead of delivery in 2017.
- This capacity will be contracted through two competitive auctions; one held in December 2014 and one held in late 2017. Those successful in the auctions will be required to provide capacity when the system needs it or face financial penalties. This will help ensure the lights stay on while also delivering value for money for bill payers.
National Grid has also published the informal auction guidelines and electricity capacity for bidders who wish to participate in the first auction.
- Final implementation of this strategy is subject to state aid approval.