2015 Report details for project: Electricity Market Reform Programme

Project name: Electricity Market Reform Programme - there are 3 reports for this project: 2013, 2014, 2015
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Organisation: DECC (D11) - see all reports for this organisation
Report year: 2015 (data is from Sept 2014)
Category: Transformation - see all reports for this category
Description: The aim of the programme is to undertake the necessary reform to the electricity market to ensure the UK can attract the investment in electricity generation needed to have a secure, affordable supply of electricity towards the end of this decade and in the longer-term and to meet its renewable and carbon emission reduction targets in the most cost-effective way. The key elements of the programme which will deliver this are: • The creation of a Contract for Difference (CFD) Mechanism which incentivises low carbon technology and generation (renewables, nuclear and CCS) in a cost-effective way; • The creation of the Capacity Market Mechanism to ensure that the market has sufficient capacity to ensure security of supply in a cost-effective way; and • Putting in place an institutional framework with sufficient credibility to administer the reforms efficiently and effectively.
DCA (RAG): Amber
DCA text: The Programme has met significant milestones including Royal Assent of the Energy Act 2013, implementing EMR secondary regulations, completed prequalification for the CfD auction and the completion of the first Capacity Market Auction. The CfD auction will begin in January 2015 and the programme is on track to award CfD contracts in the spring. As we are still in the implementation phase, risks remain.
Start date: 2010-12-16
End date: 2030-12-31
Schedule text: The first Capacity Market auction and pre-qualification for the first CfD auction were delivered in 2014, and we remain on track to complete our first round of CFD Auctions in 2015.
Baseline: £36.10m
Forecast: £35.10m
Variance: -2.80%
Variance text: Budget variance less than 5%
Whole Life Cost: £47,513.95m
WLCost text: The whole life cost for EMR now includes the estimated support costs for both Contracts for Difference and Capacity Market, resulting in a significant increase compared to earlier estimates, which only included expenditure that is not levy funded. £47,226.29m of the whole life cost is gross Levy Control Framework and levy funded expenditure. The whole life cost includes the estimated cost of CfD support payments within the agreed Levy Control Framework cap of £7.6 billion up to 2020/21, which covers all DECC’s low-carbon electricity levy-funded policies (i.e. CfD, Renewables Obligation, small-scale Feed-in Tariffs and investment contracts). For the Capacity Market, the estimated gross costs are based on an assumption of annual capacity auctions for the duration of state aid approval for the policy (i.e. until 2024/25) but ignore the approximately equivalent savings we forecast from a lower wholesale price. These assumptions are based on our latest view of how EMR will be delivered, and the most recent DECC modelling that informed the Energy and Emissions Projections publication in November 2014. However, there is considerable uncertainty around the actual level of support costs under both mechanisms, particularly given uncertainties about the evolution of demand and fossil fuel prices over the period. The WLC figure is calculated in nominal terms.
Sourcefile: IPA_2015.csv

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Acknowledgement: GMPP data has been re-used under the Open Government Licence.