UK power chiefs call for more clarity on UK’s Electricity Market Reform

With the UK's power sector estimated to need some £200 billion ($317 billion) worth of investment in the next 10-15 years, much is riding on the Electricity Market Reform, which so far lacks detail, say top power executives

Top UK power executives expressed concern this week about the lack of clarity over the UK's future energy policy, most of which is centred around the UK Electricity Market Reform (EMR).

An EMR white paper released in July by the Department of Energy and Climate Change (DECC) details policies designed to encourage investment in UK electricity infrastructure over the next few decades, in particular nuclear and offshore wind power. It is estimated that some £200 billion ($317 billion) will be required in investment over the next 10–15 years if the UK is to meet its plans of retiring coal-fired power plants, investing in nuclear and renewables and meeting carbon-reduction targets.

However, details on how this will be achieved are lacking, executives said when they gathered to discuss the UK's energy policy at a seminar held by engineer trade union Prospect at the Institute of Engineering and Technology in London on Monday.

Andrew Jamieson, regulation and markets director at ScottishPower Renewables called the EMR "complex and lacking detail".

Alan Whitehead MP, member of the DECC select committee, also said progress needs to be made. He rated the current document "six out of 10" and hopes that by next year, with improvements, it would be closer to nine out 10.

Under the EMR, a carbon price floor in the UK is proposed to be in force in April 2013. According to DECC, the floor price will "provide a stronger incentive to invest in low-carbon generation now".

However, Guy Johnson, director of regulation & public affairs at RWE npower disagreed with this and said the floor will merely mean that credits move elsewhere in Europe at a lower price and so no real reduction in emissions occurs. Of the EMR, Johnson said: "We are not getting what we asked for from the government."

Another topic that generated debate was the level of investment needed in the UK energy industry. Whitehead spoke of the challenges of finding the £200 billion required, saying much of this will have to come from outside the 'big six' energy companies. The current eurozone debt crisis adds to the challenge.

However, energy minister Charles Hendry MP said he is confident the EMR will be able to address the investment issues required to make long-term changes to UK energy infrastructure, in particular by investing in nuclear.

"I think we are one of the most exciting places for nuclear investment in the world, certainly the most exciting in Europe. We have a lot of unchecked capacity," he said.

Chief executive of EDF Energy, Vincent de Rivaz, gave the example of EDF's nuclear project plans in Somerset and spoke of the industry's need to look at projects from a long-term viewpoint and take into account the relevant costs and revenues. He drew attention to revenues that could come from the EMR proposals for contract-for-difference style feed-in tariffs, but said more details need to be established.

The final version of the EMR with technical updates is expected to be released by the end of this year.