EMR delays raise capacity risk

Crucial regulations for electricity market reform (EMR) have been delayed, Utility Week can reveal.

Secondary legislation to deliver a new subsidy regime and capacity market was expected alongside the Queen’s speech on Wednesday. However, Parliament’s lawyers reportedly need more time to scrutinise the text.

An industry source said the contracts for difference (CfD) proposals to support low carbon generation are thought to be 3 or 4 weeks behind schedule. The capacity market, to promote security of supply by paying generators (primarily gas-fired plant) to be available, is believed to need even more work.

The delay raised concerns the first capacity auctions, scheduled for December, may have to be put back. That would jeopardise the government’s stated aim to deliver new capacity by winter 2018, extending a forecast “capacity crunch”.

The EMR package, including the capacity market, is subject to state aid approval from the European Commission. Every week of delay in Westminster compresses the timetable for state aid, which already looked “challenging”, according to the source.

A spokesperson from the Department of Energy and Climate Change said the secondary legislation and associated documents are now expected out “in the second half of June”. She added: “We are in the process of finalising Parliamentary timetables and continue to make good progress towards our milestones. Our plans to go live remain on track.”

Responding to the Queen’s speech, Institution of Civil Engineers director general Nick Baveystock said it was “a pity” the secondary legislation had not been announced and it would further delay EMR.

He added: “Passage of the Energy Act at the end of last year marked a significant step forward in the UK’s ambitions to achieve a secure, affordable, low carbon energy future. This is to be commended, but Government must now ensure that the secondary legislation needed to implement the details of Electricity Market Reform is enacted by the end of this Parliament.

“A capacity market – to ensure that there is sufficient generation capacity to meet demand – and feed-in tariffs with contracts for difference, should provide greater revenue certainty for low carbon generators.  Both measures will demonstrate that the UK is serious about creating the conditions necessary to harness investment and support the transition to a low carbon economy.”