Consultation on Electricity Market Reform

The DECC consultation contains three proposals: feed-in tariffs, capacity payments and an emissions performance standard (EPS). The EPS would be for new plant only and would be implemented as an annual limit to the CO2 emissions of an individual installation. Two levels are suggested for the EPS, either 600g CO2/kWh for all new plants including the UK CCS demonstrations, or 450g CO2/kWh with an exemption for plants participating in the demonstration programme or receiving European funding for commercial deployment of CCS. The introduction of an EPS would be a significant incentive for CCS deployment.

Overlapping with the DECC consultation, there is a consultation being conducted by HM Treasury into carbon price support. The proposals are to reform the climate change levy and fuel duty so that, from 2013 onwards, they are applied to all fossil fuels used in electricity generation at rates proportional to their carbon intensity. There will possibly be relief for fuels used in CCS plants.

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