Electricity market reform
“The scale of investment needed in our electricity system in order to keep the lights on is more than twice the rate of the last decade. The fact is that the current electricity market is not able to meet that challenge. Without action, there is a risk of uncomfortably low capacity margins from around the end of the decade and a far higher chance of costly blackouts…This package will keep the lights on and bills down.”
Key facts
- Around a fifth of our existing electricity generation is closing over the next decade; and a significant proportion of new generation is likely to be more intermittent and less flexible.
- Up to £110 billion investment in electricity generation and transmission is likely to be required by 2020, more than double the current rate of investment.
- Current market arrangements will not deliver investment at the scale and the pace that we need.
- By reforming the market, we can ensure future security of supply and build a cleaner, more diverse, more sustainable electricity mix.
- This new market reform will minimise the impact on bills by insulating UK from volatile fossil fuel prices and providing investors with certainty they needed to raise capital more cheaply.
With a fifth of the UK’s electricity generating capacity shutting down over the next ten years; an increasing demand for electricity; and the need to decarbonise our power sector, business as usual is not an option. Keeping the lights on will mean raising a record amount of investment. Current market arrangements will not, however, deliver investment at the scale and pace that we need.
The Government has set out its plan to meet these challenges and reform the electricity market in Planning our electric future: a White Paper for secure, affordable and low-carbon electricity and Planning our electric future: technical update.Together, the White Paper and Technical Update set out the key measures and delivery arrangements to attract the scale of investment we need, in the most cost-effective way, to ensure future security of supply and build a cleaner, more diverse, more sustainable electricity mix.
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