Implementation of Electricity Market Reform - Energy and Climate Change Committee Contents


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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