Power Generation | Nuclear

The response to the UK Coalition Government’s plans to overhaul the country’s electricity market from the industry has been mixed.

Scotland’s First Minister Alex Salmond warned that the Electricity Market Reform proposals could jeopardise the region’s plans to invest in green energy and becomes powerhouse of renewables.

“The proposed changes have implications for our powers to support renewables, provide financial support for carbon capture and storage (CCS) and control emissions,” he said. “Against [our] successful track record, change could unnecessarily risk investor confidence and could have significant ramifications for our energy industry.”

Financial consultants Ernst & Young largely welcomed the proposals but urged that swift progress is made on implementing the changes.

“There has been wide recognition within the industry for several years that such reform is required,” says Bill Easton, director of Ernst & Young’s power and utilities team. “[But] given the long lead times and high capital-intensity inherent with large-scale low-carbon investments, such as new nuclear capacity and large-scale offshore wind projects, the framework really needs to be agreed and understood within the next twelve months.”

The proposed floor price for carbon has met with a warm welcome across the board, with director general of the Institution of Civil Engineers (ICE) saying:
“This consultation and the proposal to set a price floor for carbon, are crucial and welcome steps towards creating more certainty for investors on the likely returns from investing in low carbon electricity generation.”

Andrew Raingold, executive director of the Aldersgate Group, adds:
“The introduction of a sufficiently stable, high and credible carbon price is essential to stimulate the required step change in investment for low carbon technologies.”

The UK Energy Research Centre (UKERC) also gave a qualified welcome the proposals, with research director Jim Skea commenting: “The government appears to have grasped the nettle and proposed radical reform that takes on the challenges of low carbon, adequacy of investment, reliability and affordability… but the details will need to be carefully examined.”

But there are qualms about how much the reform will ultimately cost and who will really bear the cost – even though the Government are adamant that consumers will not bear the brunt of major price rises.

David Hunter of independent energy consultancy M&C warns:
“The reality is that consumers will have to foot the bill for replacing Britain’s energy infrastructure, including replacing a quarter of our power stations over the next ten years. The balance the government must strike is to provide a healthy incentive for private organisations to invest without writing a blank cheque that business and hard-pressed householders can ill afford.”

For further information:
www.scotland.gov.uk
www.ey.com/
www.ice.og.uk
www.aldersgategroup.org.uk/
www.ukerc.ac.uk
www.mcenergygroup.co.uk/

Related stories:
UK Government opens consultation on electricity market overhaul (17-Dec)