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Posted 4 weeks ago | 3 minute read
UK outlines electricity capacity market reforms
The government has unveiled new proposals aimed at avoiding electricity blackouts and incentivising greater investment in low carbon technologies.
In a consultation, published on 9 January, the government has set out plans to introduce new contracts to incentivise cleaner technologies to take part in the Capacity Market, and also set new timelines for oil and gas producers to reduce emissions for newly built plants from 2034.
The Capacity Market aims to ensure there is reliable electricity supply to meet peaks in demand, safeguarding against the possibility of blackouts if intermittent sources such as those dependent on weather, are not generating enough.
Launching the consultation minister for energy and climate Graham Stuart said security of energy supply has become a more urgent political issue in light of threats to long-term gas supplies across Europe following Russia’s invasion of Ukraine. “As we move towards cleaner and cheaper energy, it is essential that the UK provides secure and affordable energy for all […] the plans set out today will deliver this reliable energy and ensure the scheme that sits at the heart of Britain’s energy security is fit for the future”.
The proposals set out include:
- Incentivising greener, flexible technologies to compete in Capacity Market auctions by offering multi-year contracts for low-carbon flexible capacity, such as smart “demand side response” technologies and smaller-scale electricity storage, supporting the move towards delivering secure, clean and affordable British energy in the long term
- Ensuring a clear pathway for carbon intensive forms of capacity as the UK transitions to net zero and the capacity mix of the Capacity Market diversifies, by sending a clear signal to oil and gas generators about the timelines and requirements for emissions reduction in the 2030s and seeking evidence on mitigating any barriers this capacity may face in decarbonising
- Underpinning these efforts with a proposed new lower emissions limit in the Capacity Market which will kick in for new build plants from 1 October 2034, meaning all new oil and gas plants receiving long term agreements through the Capacity Market will be obliged to lower emissions, through decarbonising their capacity by introducing carbon capture, hydrogen and other low-carbon methods into their generation and by reducing running hours
- Reforming the Capacity Market’s approach to performance testing to ensure confidence as early as possible in the winter that capacity is available and strengthening the non-delivery penalty regime to send a clear signal that capacity must deliver in times of electricity system stress
Responses are invited until 3 March 2023.