Energy Bill becomes law

The government's plans to reform the electricity market introducing a capacity market and contracts for difference to support renewables have been given royal assent

The Energy Act 2013 received royal assent yesterday (18 December 2013), paving the way for the creation of an electricity capacity market, including payments for demand reduction, and long-term contracts for difference (CfDs), which will guarantee a certain level of payment for electricity generated from low-carbon sources.

It also sets a cap on the amount of emissions that can be generated from new fossil-fueled power stations, and outlines regulation for nuclear power. In addition, the Act confirms the closure of the Renewables Obligation to new entrants from April 2017, replaced by feed-in tariffs with CfDs to support for large-scale low-carbon generation.

The Act also includes provision for the energy secretary to set a 2030 decarbonisation target for the electricity sector, however, the earliest this can be set is 2016.

The government has hailed the Act as key to enabling the £110 billion of investment needed by 2020 to decarbonise the UK’s electricity sector and ensure long-term energy security.

“We have driven the Energy Bill through parliament on time to send out a clear signal to investors and industry,” commented energy secretary, Ed Davey. “We have delivered the certainty they need and confirmed Britain’s position as one of the most attractive countries in the world to invest in energy generation.

“We are now able to build on the measures already in place to deliver cleaner energy, affordable bills, energy security and the creation of thousands of skilled green jobs across the UK.”

Following the Act’s assent, Decc also published its EMR delivery plan setting out the strike prices for renewable technologies up to 2018/19 and the “reliability standard” that will be used in the electricity capacity market.

Representatives from the UK’s renewable sector welcomed the Act and the publication by the energy department of the EMR delivery plan.

“The government, and especially Decc, is to be congratulated on succeeding in bringing the Energy Act in on time,” said Nina Skorupska, chief executive of the Renewable Energy Association. “This is a major step forward.

“Clarity on the terms of the CfDs is very helpful for project developers and investors. It is encouraging to see many of the pieces falling into place.”

However, Maria McCaffery, chief executive of RenewableUK, warned: “There are issues still to be resolved through secondary legislation and in the face of very challenging strike prices there is much work to be done between government and industry to ensure that obstacles are removed and much-needed clean and domestic sources of energy can come forward over the next decade.”

Regulations setting out the details of CfDs are expected to come into force in July 2014, with the government deciding on whether to introduce competition for more established low-carbon technologies in early 2014.