Electricity Market Reform

Author:Mr Alan Bissett, Garrett Monaghan and Alex McLean
Profession:Arthur Cox
 
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In this update, we look at how the UK-wide implementation of Electricity Market Reform will affect Northern Ireland.

Overview

The Department of Enterprise Trade and Investment (DETI) Minister, Arlene Foster MLA, announced in May 2012 how Northern Ireland will implement a series of measures as part of the UK-wide implementation of Electricity Market Reform (EMR). Mrs Foster MLA stated "Electricity market reform proposals are aimed at addressing the challenges of ensuring the supply of reliable, low carbon and affordable electricity across the United Kingdom".

EMR will be effected through the Energy Bill (recently published by DETI's UK equivalent, the Department of Energy and Climate Change (DECC)), which will extend to Northern Ireland subject to a Legislative Consent Motion in the NI Assembly.

The main changes introduced in the Energy Bill that will affect Northern Ireland are as follows (please see overleaf for more details):

introduction of a Feed-in Tariff with Contracts for Difference (FIT CfD) for large scale renewable electricity generation (greater than 5 MW) from 2016; administration of the FIT CfD on a UK-wide basis; a UK-wide Fixed Renewable Obligation Scheme from 2027; a UK-wide Emissions Performance Standard for new coal fired power stations; and closure of the Northern Ireland Renewables Obligation (NIRO) to new generation and additional capacity from 31 March 2017 and an extension of the scheme to 2037 so that power stations accredited up to 2017 can receive the full 20 years support. Objectives

The EMR is intended to secure the investment needed to deliver a reliable diverse low carbon technology mix. It is estimated that a quarter of the UK's current generating capacity will shut down over the next decade; as a result, the UK requires an investment of more than £110bn to build power stations and upgrade the grid. It is intended that the EMR will make the UK more attractive to foreign investment in the UK energy market.

The Coalition Government published a White Paper in July 2011, setting out key measures to attract investment, reduce the impact on consumer bills, and create a secure mix of electricity sources including gas, new nuclear, renewables, and carbon capture and storage. The Energy Bill will create the legislative framework for delivering these objectives.

Feed-in Tariff with Contracts for Difference

The rationale for the introduction of a Feed-in Tariff following the structure of a Contract for Difference...

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