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The final delivery plan for government’s Electricity Market Reform is due out on Thursday. What can we expect?
As with the draft plan last summer, government released the juicy bit in advance: strike prices for different low carbon technologies. We already know that offshore wind is to get a bit more support in the medium term, while onshore and solar must make do with a bit less. There were less widely publicised uplifts for geothermal and plants running on various kinds of waste or organic fuel: gasification and pyrolysis, anaerobic digestion and biomass CHP.
The plan should show how government arrived at these new prices. It gave some reasoning for the boost to offshore wind but the cuts to onshore and solar rates – £5/MWh across the board – were less clearly justified. This raised concerns the changes were motivated by politics not evidence. The announcement was spun in Westminster as a crackdown on onshore windfarms. The renewable lobby’s counter-spin was that these technologies are becoming increasingly competitive against fossil fuels and nuclear.
Some details are expected on how the government will manage the budget, including whether they will set caps and floors on deployment of each technology. This is critical for immature technologies such as wave and tidal, which are in danger of getting squeezed out by cheaper rivals without a reserved minimum allocation. The draft allocation framework will follow in early 2014, with further decisions on what happens when the money starts running low and how government will make the transition from administrative price-setting to competitive auctions.
There will be an update on the institutional arrangements for delivering contracts for difference and some of the contract terms.
The other key plank of EMR is the Capacity Market, which is to make sure there is enough power on the system by paying generators and demand-side managers for having capacity available. Industry anticipates government will stick with the reliability standard published in the draft plan. That stipulates demand should not outstrip supply more than three hours a year. A judgement on how many MW of capacity this standard will translate to is not expected until after the next capacity assessment in 2014.
As always, the plan comes with the caveat that it must get State Aid approval from the European Commission, but it will bring investment decisions a step closer.
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