UK Government publishes further details of EMR

The Energy Act 2013 and its Energy Market Reform (EMR) is likely to have a major impact on the energy sector and smart grids, including as a result of the introduction of Contracts for Difference and a new Capacity Market. Previous articles provide a short summary of EMR as first proposed and Bird & Bird has continued to follow developments in this space since the Energy Bill was first published back in 2012. 

EMR & the Capacity Market

DECC have now published a large number of policy decisions relating to EMR. Given that EMR is too complex to have been addressed fully in the Energy Act 2013, EMR will be implemented through secondary legislation which has now been laid before parliament and by supplemental supporting documentation, including for example the Capacity Market Rules and the CFD Allocation Framework. The Government aims to bring the secondary legislation into force in the summer of this year.

The first  Capacity Market auction is to be held later this year and the latest publications follow on from updates on certain aspects of the final Capacity Market design published by DECC back in March.

DECC’s position with respect to the Capacity Market was informed by responses to a consultation launched in October 2013. One of the respondents to that consultation was Smart Grid GB, the national champion for smart grid development in Britain, whose response was completed with Bird & Bird’s assistance.

Examples of key points regarding the design of the Capacity Market now confirmed by DECC include:

  • Penalties for unreliable capacity will be capped at 200% of a providers monthly income and 100% of their annual income.
  • Capacity auction will be capped at £75/kW to protect consumers.

The first capacity auctioned is anticipated in December 2014 (to put in place capacity for 2018), with transitional auctions for demand side capacity in 2015 and 2016.

Further information

For further information see the following published by DECC:

Maintaining UK energy security

Encouraging investment in our electricity system

Proposals for implementation of Electricity Market Reform

Implementing Electricity Market Reform (EMR)

EMR: modifications to Balancing and Settlement Code (BSC) subsidiary documents

EMR consultation on industry code and licence modifications

Electricity Market Reform: Contracts for Difference

Electricity Market Reform (EMR): Contracts for Difference regulations

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