5 Conclusions
62. Despite a challenging timetable, the Government
has succeeded in putting in place a robust framework for the reform
of the electricity market. The implementation of EMR through its
first year has been relatively smooth. It is perhaps inevitable
that some hurdles would arise when introducing a new and complex
set of policies, and DECC, National Grid and the LCCC have done
a good job in working to anticipate industry's concerns and helping
participants prepare for the new regime.
63. Despite this smooth start, some key concerns
remain. In particular, the Capacity Mechanism has committed taxpayers
to annual payments of nearly £1 billion, only 5% of which
will provide new capacity and just 0.4% going on Demand-side reduction-the
rest going to existing, largely coal fired power stations, possibly
paying them to do what they would normally have done anyway. Potential
conflicts of interest, notably around the role of National Grid
with the inclusion of interconnectors, must be addressed. It is
also imperative, as we have previously called for, that EMR provides
a level playing field for demand-side response. Addressing these
concerns will help to ensure that future stages of EMR provides
value-for-money for consumers.
64. If the EMR regime is to achieve its aim of
creating a lasting secure, affordable and low-carbon energy landscape,
it must provide a clear landscape for investors and participants.
Long-term policy stability and clarity around funds available
under the Levy Control Framework will be crucial in achieving
its targets.
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