United Kingdom

United Kingdom

UK network operator prepares for new incentive regime

National Grid seeks industry input on costs & investment decisions

The UK electricity network operator, National Grid, is urgently seeking industry input on the design of the country’s incoming financial incentive scheme for low-carbon generation.

It has been known since last spring that the UK government plans to replace its well-regarded incentive scheme for renewable energy generation - centred around renewable energy certificates (ROCs) - with a new system that will allow support for other low-carbon technologies, primarily nuclear power. The new regime is due to enter into force in 2017.

Offshore wind developers have been frustrated by lack of detail about this programme of electricity market reform (EMR), arguing that such uncertainty threatens their ability to secure investment in Round 3 projects.

A "delivery plan" for EMR is not scheduled for publication by the government until the middle of next year.

Now, National Grid is calling for industry input on how the incoming system should work. In particular, the network operator is seeking evidence about the true cost of different types of electricity generation and assumptions underpinning deployment  of various types of technology.

One of the most challenging aspects of the new regime, based on contracts for difference (CfDs), is agreeing "strike prices" for each technology. The goal is for strike prices to provide low-carbon operators with a stable and fair price for the electricity they generate, but not to over compensate them.

In recent weeks, there has been considerable debate about the potential strike price for new nuclear generation, with some suggesting that companies such as EDF have been seeking a strike price at or, indeed, above the current cost of offshore wind. A strike price for offshore wind has yet to be proposed, although the UK government has challenged the industry to reduce its costs to £100/MW (€124/MW).

National Grid is accepting industry evidence until 3 December, after which it will produce an analysis of options for submission to the UK Department of Energy and Climate Change.

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