EMR could "undo 15 years of free market principles"

A risk analyst says today’s EMR “has the power to undo the last 15 years of free market principles”. And Andrew Horstead also brands the reform package “a bold move […]

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By Kelvin Ross

A risk analyst says today’s EMR “has the power to undo the last 15 years of free market principles”.

And Andrew Horstead also brands the reform package “a bold move from a government that is trying to be the greenest ever”.

Mr Horstead, risk analyst at energy and carbon management firm Utilyx, said: “The government must guarantee prices for electricity if it is to persuade the private sector to invest in low-carbon and renewable forms of generation. Without this, it will be impossible to hit our 2020 and longer-term 2050 targets.”

He said today’s consultation was “a step in the right direction in terms of providing more certainty for investors, but it just adds another level of complexity and huge cost uncertainty to end-users”.

He added: “The government has a responsibility to ensure that its proposals deliver a simple long-term framework that allows for innovation and flexibility; the risks of getting it wrong are too great.”

And he said the UK is currently facing an energy “trilemma” – trying to balance security of supply, affordability and sustainability”.

“Something has to give,” he said. “With so much traditional power going offline, security of supply has to be the government’s priority, otherwise we could see the lights go off.”

Mr Horstead also found mixed messages coming out of Whitehall regarding a carbon price floor. “The government previously indicated in June that a carbon floor price would replace the Climate Change Levy charged on metered electricity.

“Today we learn that not only will the CCL be applied on all fossil fuels used to generate electricity, but will also retain the CCL liabilities of electricity supplied to the final consumer. In addition, previously exempt good quality combined heat and power is now liable for CCL on fossil fuel burnt in CHP stations. The cost ramifications are huge and will lead some to question the financial longevity of their CHP plants.”