Alan Whitehead MP details the problems facing the government in its bid to reform the electricity market
Frenetic preparations are currently under way in DECC to translate the principles and outline timescales set out in the electricity market reform white paper into meaningful mechanisms that can regulate the electricity market firmly in favour of customers, as well as usher in the long-term replacement of, and investment in, the low-carbon energy plants and smart grid structures that will serve to keep the lights on and emissions down to perhaps 100g of carbon per kilowatt hour by 2030 – it is approximately 450g currently.
The plan is to complete the detail of the reforms in time for a Bill to go through parliament in early 2012, but that timetable looks to be slipping substantially. It is now likely that it will not come before the house until the end of next year. That is perhaps not surprising, because there are several significant dilemmas still to be resolved. One of them is where the estimated £200 billion of investment will come from. It is hoped the large energy utilities will provide a lot of it, but looking at the major energy companies’ balance sheets, I’m not sure if they can carry too much new investment.
Another dilemma is that the existing electricity market doesn’t really work. The big six are now an effective, if accidental cartel: they own much of the country’s generating capacity, and some 99% of retail supply. Should some sort of open pool system be introduced into which all suppliers have to sell their wares transparently, or will the “market” as it stands, with some bells and whistles attached, do the job?
The signs are that the government will produce a modified electricity market that doesn’t really deliver. It is time, I think, to take a more radical approach, such as interconnectors with the rest of Europe to supply reliable energy when variable (renewable) supply doesn’t deliver, and decentralised grids. Getting it wrong will mean that we will be locked into a centralised, probably high-carbon system for years.
