• On 29 November 2012, the Department for Energy and Climate Change (DECC) published the long awaited Energy Bill which sets out provisions that aim, among other things, to incentivise investment in low carbon electricity generation (ie renewables, fossil fuels with carbon capture and storage, and nuclear).
  • The Energy Bill provides a framework for the Government's Electricity Market Reform (EMR) proposals.
  • It sets out heads of terms for the proposed feed-in tariffs based on contracts for differences (FiT CfDs) and clarifies the intended role for the System Operator in administering and delivering the FiT CfDs  and the capacity market for wholesale electricity.

1. E-briefing

Our e-briefing summarising the key provisions of the Energy Bill is available here.

2. Key provisions of the Bill

The Bill:

  • empowers the Secretary of State (SoS) to regulate for a capacity market that will be based on a four-year peak demand forecast, and competitive capacity auctions that may include demand side response participation;
  • provides the SoS with powers to manage the System Operator's role as administrator of the capacity markets and FiT CfDs, and enabling the SoS to manage conflicts of interest; 
  • provides Government with transitional powers to grant early CfDs (investment contracts) to developers prior to full implementation of EMR;
  • grants powers to the SoS to enable intervention in the wholesale electricity market for the purpose of improving liquidity levels and access to long-term contracts;
  • establishes the legal framework for a transition from the Renewables Obligation to a new certificate purchase scheme funded by a levy on electricity supply;
  • sets a statutory limit equivalent to 450g/Kwh for new fossil fuel plant with provisions enabling "grandfathering" of gas and only partial application to CHP plant;
  • confirms that the Office for Nuclear Regulation will become a statutory body with key areas of responsibility;
  • facilitates the sale of the Government Pipeline and Storage System for aviation fuel by enabling the transfer of certain use and access rights to private bodies;
  • introduces the power to designate a Strategy and Policy Statement in order to strengthen the current regulatory framework for the energy sector and bring greater clarity and structure to the roles of Government and Ofgem; and
  • enables offshore wind generators to build and commission their transmission infrastructure without the need for a transmission licence.

3. Useful Links