Tuesday, 21 September 2010

UK preparing to reform electricity market

Britain is set to reform its electricity market to encourage energy companies to invest the billions of pounds needed for low-carbon power generation, including nuclear, a minister said on Sunday, Sept 19.

Energy Secretary Chris Huhne told Reuters in an interview that consultation on changes to Britain's electricity market would begin at the end of the year, with legislative proposals published in spring 2011.

"(The consultation) is to make sure that we are putting in place a framework that will bring forward the low carbon generation from whatever source that we need over the next 10 years," Huhne said.

He said the framework had to be "stable, clear and certain enough" to persuade the energy companies to invest, as well as the financial markets that will fund them.

Energy regulator Ofgem has said Britain needs to invest £200 billion (RM971.87 billion) to ensure supplies and meet climate change targets and will fail to secure this without changes to the present system of market arrangements and incentives.

"We have a major job not just in getting the energy companies to invest, but also sensitising the wider investor — pension funds, insurance companies — that this is a sensible thing for them to be investing in," Huhne said.

Energy companies have been calling for a redesign of the power market to remove the volatility in the price they are paid for their output.

Without more certainty in the level of power payments the firms say they cannot invest the billions required to build new nuclear plants or invest in as yet unproved carbon capture and storage technology.

At present renewable power providers like wind farms benefit from a government incentive scheme that pays for their output regardless of the wholesale electricity price.

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