The UK Government has announced a package of coalition decisions allowing progress on the long-awaited Energy Bill, which is expected to be introduced this week:

  • The creation of a Government-owned company to act as a single counterparty for Contracts for Difference for low carbon electricity projects.
  • Powers to introduce a capacity market, allowing for capacity auctions from 2014 for delivery of capacity in the winter of 2018/19

The amount of market support to be available for low carbon electricity investment (under the Levy Control Framework) up to 2020 has been set at £7.6 billion. This is intended to support the UK’s diversification of our energy mix by increasing the amount of electricity coming from renewables (and so reduce our dependency on gas imports) as well as supporting new nuclear power and carbon capture and storage commercialisation.

The Government’s refusal to set a decarbonisation target range for 2030 is widely regarded as a failure to close off negotiations within the coalition. A decision to exercise this power has been postponed to 2016 at the earliest. In the meantime, the Government will issue guidance to National Grid setting out an indicative range of decarbonisation scenarios for the power sector in 2030 consistent with the least cost approach to the UK’s 2050 carbon target.