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Generators have largely welcomed the government's technical update on Electricity Market Reform (EMR) and National Grid's new role. However, concerns remain about timing and whether the institutional arrangements will give investors enough certainty, particularly over nuclear, without falling foul of state aid rules.
A source at one of the big six energy suppliers said: “[State aid]
is a massive issue and should not be underestimated … We know why
government is reluctant but they need to recognise that one of the
impetuses for EMR was to secure funding from new areas.” For that to
happen, he said, the counterparty must be “triple A rated”.
Neither is there any room for complacency about detail, he said, and
suggested the Department of Energy and Climate Change’s central case
security of supply scenario, and its stress tests, were too optimistic.
“They need to go beyond the average capacity margin view … and these
mechanisms take time to bed down.”
Differential contracts for new and existing generation would also be
welcomed, he said, given how unlikely it was that companies would make
investment decisions on the back of a one-year contract.
is a massive issue and should not be underestimated … We know why
government is reluctant but they need to recognise that one of the
impetuses for EMR was to secure funding from new areas.” For that to
happen, he said, the counterparty must be “triple A rated”.
Neither is there any room for complacency about detail, he said, and
suggested the Department of Energy and Climate Change’s central case
security of supply scenario, and its stress tests, were too optimistic.
“They need to go beyond the average capacity margin view … and these
mechanisms take time to bed down.”
Differential contracts for new and existing generation would also be
welcomed, he said, given how unlikely it was that companies would make
investment decisions on the back of a one-year contract.
This article first appeared in Utility Week’s print edition of 13 January 2012.
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