Nov. 30 (Bloomberg) — The U.K.’s Energy Bill that seeks to
secure national electricity supply is “unhelpful” to investors
and risks reducing spare capacity, said Liberum Capital Ltd.
The bill published yesterday sets out plans for a so-called
capacity market to pay generators for providing power at times
of peak demand. The government won’t make a final decision on
payments until 2014, London-based Liberum said in a report.
“Our view is that capacity payment details in this Energy
Bill are unhelpful to investors,” said Dominic Nash, a Liberum
utilities analyst. “We see the chance of the power markets
tightening before new capacity is developed,” he said.
Britain is seeking to secure electricity supplies as aging
coal-fired power plants are due to close by 2015 under European
Union environmental laws and nuclear plants are decommissioned.
Regulator Ofgem says there’s a risk of shortfalls from 2015.
The government wants a capacity market to spur investors to
provide back-up gas-fired power stations as it pushes to reduce
greenhouse gas emissions by expanding renewable generation that
provides only variable levels of power depending on the weather.
Liberum, which sees half of capacity shutting by the early
2020s, said lack of clarity on incentives may limit construction
of gas-fired stations. SSE Plc said Nov. 14 it would stall a gas
plant project in Wales until it got more details on U.K. policy.
“There will not be a decision until 2014, which means that
if no new investments come forward until then, we could be
looking at 2017 before meaningful new gas-fired power stations
will be added to the U.K. power system,” Nash said.
Greenpeace Criticizes
Environmental group Greenpeace criticized U.K. policy for
spurring “new gas stations that we don’t need” and that will
add to electricity charges. Energy Secretary Ed Davey yesterday
said the bill supports renewables, nuclear, gas and carbon
capture and storage. The government estimates the capacity
market may add 14 pounds ($22) a year to domestic bills.
The first auction of current or new capacity may begin in
2014 for delivery from 2018 depending on “evidence of need.”
Ministers will decide on the capacity auctioned and will
offer it four years ahead of delivery, while winners must
provide power when needed in return for steady payments.
New plants will be able to get contracts of as long as 10
years, with one-year contracts for current plants. The U.K.
plans to publish design proposals for the market in May.
To contact the reporter responsible for this story:
Sally Bakewell in London at
Sbakewell1@bloomberg.net
To contact the editor responsible for this story:
Reed Landberg at
landberg@bloomberg.net
