Memorandum submitted by the Nuclear Industry
The Nuclear Industry Association (NIA) welcomes this
opportunity to provide written evidence to the Committee on this
The NIA is the trade association and information
and representative body for the civil nuclear industry in the
UK. It represents over 250 companies operating in all aspects
of the nuclear fuel cycle, including the current and prospective
operators of the nuclear power stations, the international designers
and vendors of nuclear power stations, and those engaged in decommissioning,
waste management and nuclear liabilities management. Members also
include nuclear equipment suppliers, engineering and construction
firms, nuclear research organisations, and legal, financial and
Some of our members, particularly those participating
in the UK nuclear new build programme, will be making their own
detailed responses to the Committee. The purpose of this NIA response
is to make some higher level points on the key issues identified
by the Committee.
What should the main objective of the Electricity
Market Reform project be?
The electricity market reform should be structured
to produce market conditions which incentivise and reward those
generation characteristics it is government policy to deliver.
To reflect the long-term nature of the investments it should provide
policy stability over an extensive period. The key outcomes should
be the incentivisation of new plant, including low carbon, reliable
and secure generation, at the necessary capacity to help maintain
the UK as a modern cutting edge economy.
It is important that the reform should continue a
market-based approach, where strong competition will lead to the
least cost to consumers.
Do capacity mechanisms offer a realistic way of
achieving energy security, low-carbon investment and fair prices?
Capacity mechanisms are one of the possible ways
of creating a financial incentive for utilities to develop the
large scale generating capability which the government wants the
private sector to provide for the UK.
The proposals put forward by government are one possible
way of achieving this, and NIA will comment more on those issues
in our response to the DECC consultation on EMR.
What is the most appropriate kind of capacity
mechanisms for the UK?
This is more an issue for the relevant utilities
and Government than for the NIA.
Should the system of Feed-in Tariffs be focused
on particular technologies or maintain a wider technology-based
Again this is more an issue for the utilities and
Government than for the NIA.
Will it be feasible to deliver EMR in one
go, or will regulations and implementation be spread
This will depend on the model of measures selected,
and again is more an issue for the utilities and government. Nonetheless
it is important that the measures chosen are consistent and compatible,
and implemented in a way which does not negatively impact on certainty,
market confidence or clarity. It is particularly important, as
mentioned above, that the package should provide policy stability
over an extensive period.
Will market reform increase political risk for
investors or create certainty?
A properly conducted and effective EMR is an essential
pillar in the government's work to create a market framework where
investors can have certainty that their investments will be profitable
in the long-term. It is also critical to meeting the government's
goals on carbon emissions and security of supply.
Will the Government's proposed package of carbon
price floor, EPS, FITs and capacity mechanism provide sufficient
transformation to achieve goals on climate change, security of
supply and affordability?
These are all valid measures and will play an important
role in delivering these key aims. Whether they alone are enough
is a matter for government to discuss directly with relevant utilities.
What synergies and conflicts will there be between
proposed mechanisms and policies already in place?
Whichever mechanisms are ultimately selected, they
must be structured to avoid conflicts with new or existing mechanisms.
It will be important that the carbon floor price works properly
with EU ETS. The EMR must result in a market where government
aims are properly rewarded in the market framework and there is
certainty and clarity for investors.
Will a carbon floor price be feasible in the context
of EMR and at what level should it be set?
There is no reason in our view why a carbon floor
price should not be feasible. The level at which it is set is
a matter for government, utilities and economic analysts to decide
What effects will EMR have on the development
of capacity for electricity storage and the development of interconnectors
between the UK and other electricity markets?
This is not an issue for the NIA.