The objective for the Electricity Market Reform (EMR) is to ensure that the UK power supply and infrastructure is up to date in order to meet the energy needs in the years to come.
According to the Department of Energy and Climate Change (DECC), the need for EMR is crucial as around a fifth of Great Britain’s coal and oil fired power plants will close by 2020 in order to adhere to environmental standards. As a result the demand for electricity will grow significantly and more than £110bn in investment is needed to build the equivalent of 20 large power stations as well as upgrade the national grid.
Key Components of EMR
Contracts for Difference: support low carbon energy investors by removing commercial risks such as wholesale price risks and by providing predictable revenue streams.
Capacity Market: Financial incentive to provide reliable capacity and secure UK energy supply.
Analysis by OFGEM shows that electricity prices will increase in the short term to help fund the investment however it is estimated by the late 2020, bills will be about 4% lower than if the EMR hadn’t been introduced.
After the investment stage, low carbon generation facilities will hopefully lower the wholesale prices over the period 2016 – 2030. OFGEM estimate household bills will be lowered by £38- £55 (based on the AQ of 33,000 for gas and 16, 500 for electricity)
Pulse Business Energy will stay up to date with all changes in EMR and model your data to see what EMR would mean for your company.