Capacity Market reforms a missed opportunity
Catherine Mitchell and Michael Grubb comment on new Energy & Climate Change Select Committee report
By George Smeeton
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The Government’s Capacity Market reforms are a missed opportunity, says Catherine Mitchell, Professor of Energy Policy at University of Exeter.
Prof Mitchell was commenting on a new report from the Energy & Climate Change Select Committee, which says that the Capacity Market favours fossil fuel generating capacity over demand-side technology, and could result in higher bills and increased greenhouse gas emissions.
Prof Mitchell said: “The report confirms that the Government has missed the opportunity to design a Capacity Market that would cut energy waste, reduce emissions and save people money.
“Giving a higher priority to cheaper, low-carbon approaches such as managing demand flexibly and interconnectors would cut people’s energy bills, improve energy security and be consistent with the need to remove fossil fuels from the electricity generation mix almost entirely within 15 years.
“Other countries like the United States use demand-side measures to a far greater extent, but the Government appears to have ignored such robust real-world evidence in favour of special pleading from the Big Six generators.”
Professor Michael Grubb, Professor of International Energy and Climate Change Policy at University College London (UCL) highlighted the comment by the Committee that Contacts for Difference (CfDs) and the Capacity Market risk pursuing competing aims rather than complementing each other.
Professor Grubb said: “The Energy Market Reform heralds radical change in the way Britain approaches the electricity sector, and it is fitting and useful that the Energy and Climate Change Committee scrutinises its initial implementation as this Parliament draws to a close.
“Its conclusion that the government has succeeded in “rolling out its reform relatively smoothly” is a fair assessment of one of the most ambitious of the Government’s reform programmes, but the judgement remains “could do better.”
“Both the CfDs and the Capacity Market will require further development, particularly as attention moves to investment for the post-2020 transformation of the electricity system. Most notable is the Committee’s observation of some risk of the two instruments “pursuing competing aims rather than complementing each other”.
“In particular, the Capacity Market, introduced to ensure security of supply, will require changes to implementation rules if it is to deliver the right balance of investment – on both supply and demand-side - for a clean and secure energy future.
“Finally, the striking omission in the Committee’s report is reference to the role of carbon pricing and the decision to suspend escalation of the carbon price floor. Ultimately, the EMR package can only work efficiently if industry believes that emitting CO2 will, indeed, become more expensive over time.”