Energy Act 2013
The Act is focused on Energy Market Reform (EMR). It is a package of measures which will help incentivise up to GBP110bn (USD172bn) of further investment required over the coming decade to update the UK’s ageing energy infrastructure with a more diverse and low-carbon energy mix to help ensure future security of electricity supply, and to meet climate and renewables targets in a way that minimises costs to consumers. Key elements of the reform package include:
– The introduction of Contracts for Difference (CfDs), long-term contracts to provide stable and predictable incentives for companies to invest in low-carbon electricity generation, including renewables, nuclear and carbon capture and storage
– The introduction of a Capacity Market, to ensure security of electricity supply; It provides regular payments to capacity providers (both demand and supply), in return for which they must be available to produce energy (or reduce demand) when the system is tight, or face penalties
– A Carbon Price Floor (established in April 2013) of GBP16 (USD25) per tonne from 2013 rising to GBP30 (USD47) per tonne in 2020 to reduce investor uncertainty and provide an incentive to invest in low carbon generation now
– An Emissions Performance Standard (EPS) set at 450g CO2/kWh to reinforce the requirement that no new coal-fired power stations are built without CCS, but also to enable short-term investment in gas.
