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EDF to gain from DECC move to fast-track UK electricity investment

16 Dec 2011 16:31:12 | edem

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The UK government is taking steps to ensure the £200bn (€238bn) investment required in its energy sector is not delayed by its electricity market reform process.

Under the arrangements, the Department of Energy and Climate Change (DECC) has said it is "prepared to enter into discussions" with developers to enable what it terms "early investment decisions" for low-carbon power plants.

"We want to give certainty to investors to develop the mix of clean energy sources that will power the UK in the years to come," energy secretary Chris Huhne said in the government's update on market reform on Thursday (see EDEM 15 December 2011).

The fear is that the lengthy process of phasing-in the government's preferred means of supporting low-carbon power generation - long-term feed-in tariffs (FiTs) with contracts for difference (CfDs) - will delay investment and ultimately threaten supply security.

The FiT with CfD regime is set to be introduced from 1 April 2017.

EDF Energy, the utility behind four of the UK's planned nuclear reactors, welcomed the DECC move and confirmed it will take advantage of it.

"We meet the criteria to start discussion on transitional arrangements to allow early projects to progress and we will respond to DECC's invitation to ... discussions," the company said in a statement late on Thursday.

The criteria

DECC said it is prepared to enter discussions with developers in relation to significant projects with the following characteristics:

The type of generation is able to benefit from the proposed FiT with CfD;

The developer can demonstrate that, if the project does not receive some form of "comfort" from the government before 2014, it will be cancelled, put at significant risk or delayed;

The developer can demonstrate that there are credible plans in place to progress the project to start generating electricity in or after 2016;

The project is not eligible for the government's renewables obligation (RO) subsidy regime;

The developer can demonstrate that, if the project is eligible for the RO, there is no realistic prospect of it being accredited under the scheme by 31 March 2017 or that there is a real prospect of it being delayed and, as a result, prevented from being accredited by the 2017 date.

In total, 19GW of power generation capacity is set to be removed from the UK system by 2020. By comparison, in the past decade just 6GW has come off the system.

Unlike the RO, the FiT with CfD regime is designed not only to support renewable energy but also to benefit all low-carbon forms of power generation, including nuclear and carbon capture and storage-equipped fossil-fuel fired plants.

"These arrangements, once details are finalised, are going to be crucial to allow us to take a final investment decision on new nuclear at the end of next year," EDF Energy's chief executive, Vincent de Rivaz, said.

The first of the UK's new nuclear plants, Hinkley Point C, is expected to go on line in 2019 (see EDEM 10 November 2011). JS

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