Government told to go ‘back to the drawing board’ with Electricity Market Reform proposals

UK government plans to sneak a new nuclear subsidy through the

backdoor were blasted in a report published today by Westminster’s Energy and Climate Change Committee.

The Coalition Agreement that formed the basis of the Conservative-Lib Dem Government last summer pledged to allow new nuclear power stations to be built ‘provided that they receive no public subsidy’. But MPs today echoed our own concerns that government’s Electricity Market Reform proposals will effectively provide subsidies to nuclear generators through new long term contracts and a carbon price floor that would hand them windfall profits.

Government proposals for Electricity Market Reform should focus on supporting new and emerging clean technologies and cutting the need for new

power plants through energy efficiency, smart grids, storage and connections with other European countries.   Instead they appear to have been designed to prop up an industry which has had five decades to stand on its own two feet.

It’s not surprising that the government is reluctant to come clean about this U-turn in policy. Restructuring the market to be hopelessly loaded in favour of nuclear will suck investment away from safer and more economic options.

As Committee Chair Tim Yeo put it, it is “deeply irresponsible to skew the whole process of electricity market reform simply to save face.  The Government must go back to the drawing board and come up with a more straightforward and coherent set of plans to reform the electricity market.”

The report, available here, concludes:

•   The wholesale market should be fundamentally reformed to break up the dominance of the Big Six energy companies, in order to allow new entrants to invest in the UK and improve the liquidity of the market.

•   The long term contracts designed to encourage low carbon energy sources—known as Feed-in-Tariffs with Contracts for Difference—will work for nuclear, but different types of contract are needed for renewables and other clean technologies.

•   It is too early for the Government to design a capacity mechanism given the rapid development of smart meters, interconnectors and storage systems that could remove the need for “peaking plant”.

•   The Carbon Price Support is a necessary short term solution to weaknesses in the EU Emission Trading System, but will increase costs for consumers and could provide a windfall profits to existing nuclear generators.