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Scotland lays out 'significant' CfD concerns

23 May 2012 17:08:16 | edem

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Scotland's most senior politician expressed "significant concerns" about the UK central government's preferred electricity generation mix on Wednesday, only 24 hours after the publication of Westminster's draft energy bill.

The bill contains provisions for the support of low-carbon power generation via long-term feed-in-tariffs (FiT) with contracts for difference (CfD), a key element of electricity market reform (see EDEM 22 May 2012).

The proposed legislation defines low-carbon power as that generated by renewables, nuclear and carbon capture and storage (CCS)-equipped fossil fuel-fired plants.

But Scotland's first minister Alex Salmond, leader of the ruling Scottish National Party (SNP) and head of the devolved government, said at an energy conference in Aberdeen, Scotland, there were "significant concerns about the energy mix that the UK government is pursuing", in particular, whether a system of support for nuclear power can be "compatible with other systems of low-carbon generation".

The UK is in the early stages of reforming and extending its existing support scheme for renewables to encompass nuclear power and CCS in a bid to meet emissions reduction targets within its electricity sector. The intention is that the market will decide how emissions reductions can be achieved at the lowest cost across the generation mix while ensuring security of supply.

"It will be designed to encourage a balanced portfolio of renewables, new nuclear and CCS, and to ensure that these technologies can compete fairly in the marketplace," UK energy secretary Ed Davey said when the draft was published.

The SNP has long maintained an anti-nuclear power stance. The party swept to its second term in government in May last year partly on the back of a pledge for Scotland to meet 100% of its power demand from renewable sources by 2020.

Self-determination

Alongside the nuclear dispute, the degree of self-determination that Scotland will enjoy post-electricity market reform emerged as a second raw point.

Under current arrangements, the Scottish government is responsible for setting support levels under the existing scheme, the renewable obligation (RO).

"It's crucial that the [CfD] mechanism grants the same discretion for Scotland in the future as we have now over the RO," Salmond said. "In particular we must ensure that secondary legislation attached to the bill is delivered in a way that respects the wishes of the Scottish parliament."

The draft bill includes a pledge to "consult with and involve the devolved administrations, ensuring respect of each devolution settlement" before making "key policy decisions".

But Scottish energy minister Fergus Ewing warned immediately after publication of the text that this may not be sufficient to ease Scottish concerns.

"We envisage our role not merely as consultees to the processes of decision-making but as partners," Ewing said. "We wish to play a full decision-making role, not simply be asked about important or vital decisions after they have been made."

The bill is expected to become law in 2013, with the first low-carbon projects supported in 2014 under transitional arrangements between the RO and FiT CfD (see EDEM 16 December 2011).

The UK will consult on the first set of CfD strike prices next year and will announce the them in the second half of that year within its "2013-2018 delivery plan." This will give developers up to a year of price visibility, ahead of them coming into force in mid-2014, the Department of Energy and Climate Change said. JS

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