EY UK Energy blog

Energy Bill: We have the framework now let's focus on implementation

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Posted: Monday, 3 December 2012 at 12.30pm

The publication of the Energy Bill marks the opening of the final chapter in the UK's Electricity Market Reform (EMR) process that began some seven years ago. The fact that Treasury and DECC have finally reached an agreement that has preserved much of the long-standing intent behind the reform is welcome and will be a relief to potential investors and existing asset owners alike.

The measures announced achieve the difficult balance of preserving the majority of the aspiration to meet our 2020 targets for emissions and renewable energy, while acknowledging the potential role of gas in our fuel mix and moderating consumer bill increases. Whilst undoubtedly reflecting a degree of compromise, the UK finally seems to be back on track to create the much needed environment of stability and trust in the energy policy framework.

According to our recent Powering the UK report, investment in the sector reached a 20-year high at £10bn last year and employment grew by 6%. Instilling confidence around the clear direction and objectives of energy policy is the only way to keep that investment momentum going and to continue to create jobs and growth for the UK. The priority should now be on the absolute commitment to implementation. 

It may not be until autumn 2013 before this Bill reaches the statute book, so maintaining confidence in its safe passage will be vital.  As ever, details remain to be ironed out or fully articulated.  It is inevitable that in the coming days questions will be raised about specific elements, for example exactly how the CfD (Contracts for Difference) counter-party will operate, whether the capacity market will actually be deployed, and if so whether it will simply reward existing assets or incentivise new-build? Government and industry should work closely together to deliver on these details.

We should also recognise that many other vital activities are running in parallel with the Bill's passage, such as the determination of the strike price for the first nuclear CfD to support Hinkley Point C, and the ongoing focus to ensure that the planning regime does not act as a barrier to energy infrastructure development.

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