Press release

New energy reforms to support 250,000 jobs, keep bills down and produce cleaner energy

Electricity Market Reform Delivery Plan published

Up to £110 billion of private sector investment in the electricity sector is set to be unlocked with the publication of the Electricity Market Reform Delivery Plan.

The investment is needed by 2020 alongside crucial measures to improve the security of electricity supply, which will be made possible now that the Energy Bill has received Royal Assent. This provides investors and industry with the confidence they need to invest in the energy sector and 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.

There has already been over £31 billion of investment announced in renewable electricity generation projects since 2010, and this package is expected to attract around £40 billion of investment in renewable electricity by 2020. This will provide enough power for 10 million homes while at the same time reducing carbon emissions by around 20 million tonnes – equivalent to 25 per cent of annual household emissions.

Secretary of State for Energy and Climate Change, Edward Davey 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.

A number of accompanying announcements have been made alongside the Electricity Market Reform Delivery Plan today:

The first EMR 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 Delivery Plan is a revised version of the CfD, with improvements made to the contract terms to further support the ability of developers to bring forward investment at lower cost to consumers. Together with the strike prices, this 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. This will be decided in early 2014.

The Government has sent out draft investment contracts to the sixteen renewables projects that have progressed to the next stage of the ‘FID Enabling for Renewables process’. Ten projects 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 spring 2014.

A Capacity Market is being introduced which works by providing regular payments to capacity providers so that they are available to and 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 today confirmed the level of system security that will be required under the mechanism.

Ofgem has also today approved National Grid’s request to develop new services to ensure we have sufficient capacity in the period before the Capacity Market is operational. This will see existing and mothballed facilities being available to generate power to meet additional demand as necessary.

Notes to editors

Royal Assent of Energy Bill

1.The Energy Bill received Royal Assent on 18 December 2013 following completion of its parliamentary passage on 11 December.

Contracts for Difference (CfDs)

2.The draft CfD contract published today builds on that published in August 2013. DECC has also today published an explanation of the key changes that have been made since August. Further details can be found at: https://www.gov.uk/government/policies/maintaining-uk-energy-security–2/supporting-pages/electricity-market-reform

3.We anticipate that CfD regulations will be enacted (subject to Parliamentary timing) in July. Submission of the first applications for CfDs is expected to be the autumn with contracts awarded by the end of the 2014.

EMR Delivery Plan

4.The Delivery Plan now confirms that the reliability standard that will guide the level of capacity that is contracted within the Capacity Market is a Loss of Load Expectation (LOLE) of 3 hours/year. This translates as a system security level of 99.97%. The Delivery Plan can be found at: https://www.gov.uk/government/publications/electricity-market-reform-delivery-plan

FID Enabling for Renewables

5.The sixteen applicants to Final Investment Decision (FID) Enabling for Renewables that met the minimum threshold evaluation criteria in Phase 2, announced on 4 December, today received draft investment contracts – the first contracts issued as part of the reforms to the electricity market. Project developers will need to confirm their commitment to the contract process by submitting a binding application in March 2014.

6.These applicants have also today been informed of the provisional ranking of their projects in the Phase 2 evaluation process and their affordability, on a provisional basis, based on the budget and allocation approach set out in ‘Update 3: Contract Award Process’. Those projects which are provisionally affordable, based on their Phase 2 provisional score and project information are set out below. However, it should be noted that the final affordability assessment will not be carried out until spring 2014 when applicants confirm that they want an investment contract through a binding application.

Provisionally affordable (listed in alphabetical order)

NB The latest information on FID Enabling for Renewables and on provisionally affordable projects is available on the FID Enabling for Renewables webpage

Qualifying Project Applicant Technology
Beinn Mhor Wind Farm Beinn Mhor Power Limited Onshore wind
Burbo Bank Offshore Wind Farm Dong Energy Wind Power A/S Offshore wind
Drax 2nd Conversion Unit (Unit #3) Drax Power Limited Biomass conversion
Drax 3rd Conversion Unit (Unit #1) Drax Power Limited Biomass conversion
Dudgeon Offshore Wind Farm Dudgeon Offshore Wind Limited Offshore wind
Heckington Fen Ecotricity Group Limited Onshore wind
Hornsea Offshore Wind Farm Dong Energy Wind Power A/S Offshore wind
Lynemouth Power Station Lynemouth Power Limited Biomass conversion
Teesside Renewable Energy MGT Power Limited Dedicated Biomass with CHP
Walney Extension Offshore Wind Farm Dong Energy Wind Power A/S Offshore wind