The UK government has outlined a number of potential reforms for the Capacity Market (CM) in a bid to unlock the nation’s renewable sector and clean energy future.
The proposals have been released as a means to maintain energy security in the future whilst additionally providing a boost in achieving a fully decarbonised power system by 2035.
“As we move towards cleaner and cheaper energy, it is essential that the UK provides secure and affordable energy for all. The plans set out today will deliver this reliable energy and ensure the scheme that sits at the heart of Britain’s energy security is fit for the future,” said Energy and Climate Minister, Graham Stuart.
One of the new proposals includes incentivising greener, flexible technologies in order to compete in CM auctions. This would be achieved by offering multi-year contracts for low carbon flexible capacity. The government includes smart demand side response technologies and smaller-scale electricity storage amongst these technologies.
The result of this could help deliver a clean energy system in the UK without compromising on price and leaving millions struggling to pay energy bills.
Another proposal emphasises the need for a clear path for carbon intensive forms of capacity. The government has stated that, as the UK transition to net zero and the capacity mix of the CM changes, there is a need to send a clear signal to oil and gas companies on the timelines and requirements for emissions reductions in the 2030s.
Transparency will be crucial for this and by highlighting well established targets, many companies can increase investment in the sector and support the net zero journey in the UK.
One of these crucial targets, particularly within the CM scheme, will be a proposed new lower emissions limit which would be in effect from October 2034. As a result, new oil and gas plants receiving long term agreements via CM will be obliged to lower emissions.
This could be achieved by a range of different methods including carbon capture and storage, the use of hydrogen and reduced running hours.
The final proposal calls for steps to be taken to strengthen CM’s ability to deliver security of supply. In order to achieve this, a reform would be required on the scheme’s approach to performance testing. This could send a clear signal that capacity must deliver in times of electricity system stress.
“It’s vital that we decarbonise our electricity system completely by 2035, so this consultation represents an important step forward in that process,” said RenewableUK’s chief executive Dan McGrail.
“We need to incentivise more investment in new low carbon flexibility in our modern energy system based on renewable technologies including wind, solar, tidal stream and green hydrogen. This will strengthen the UK’s energy security, enabling us to move closer towards energy independence in the years ahead.”
