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Iron Ore Mining

Energy Market Shake-Up Creates New Low Carbon Investment Opportunities

Thursday, 14 July 2011

The UK government has just proposed the biggest shake up in the electricity market in two decades in the Electricity Market Reform White Paper published on July 12, 2011. Regulatory changes will come into effect in 2013. These include the replacement of the Renewable Obligation with a contracts for difference (CfD) feed-in tariff for low-carbon generation, an emissions performance target for new fossil fuel power stations and a capacity mechanism to improve energy supply security.

The Fukushima nuclear disaster in Japan has not altered the government’s plans to include nuclear in the UK’s low carbon future. Nuclear power developers such as EDF clearly benefit from the proposals with the combined carbon price support and contract for difference creating the necessary framework for investment. EDF plans to build four nuclear reactors in the UK.

What do the energy market reforms mean for energy buyers? With £110 billion of investment needed, electricity prices are set to increase. The government claims future increases will be 6% less than under current market rules. Customers will also benefit from the capacity mechanism through demand response services from firms such as EnerNOC. EnerNOC is already working in partnership with the UK Power Networks’ Low Carbon London project, incorporating demand-side management resources into the electricity grid.