A Modest Proposal

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INTRODUCTION To achieve targets that lead to a low-carbon environment, strong incentive in investing in new low carbon electricity generation should be pursued. The Government has introduced a programme to try and achieve such goals in the UK, known as the Electricity Market Reform (EMR). EMR has been proposed by the Government in 2010 and then legislated via the Energy Act in 2013. The reform aims to decarbonise and secure the electricity supply and to also achieve a balance between reducing energy bills for the consumers and to attract and grant enough support for new low carbon electricity generator participants. The EMR introduced a number of mechanisms that try to achieve such a goals, in particular “A Capacity Market (CM)” and “A Contract …show more content…

Each different technology that is interested in securing a contract must prove that they will be generating at most times and cover the thresholds minimum which is different for each of the renewables. CfDs are only applicable to applicants who are not supported by any other contracts, which include the RO, small scale FiT or the Non Fossil Fuel Obligation. The contracts where originally to be allocated on a first-come-first-serve bases, but has now been changed to constrained allocation rounds, where applicants are all assessed equally and rounds take place annually. (DECC, EMR – CfD, Contract and Allocation Overview, 2013) WHY THE CFD WAS ADOPTED AND ITS CURRENT OPERATIONS Before implementing the Contracts for Difference mechanism a few other instruments have been considered, all of them had very similar goals and CfD was chosen since it seemed like the mechanism that would reach these goals more efficiently. The other option that was closely looked at was the PFiT (Premium Feed in Tariff) which is a version of the FiT and topes up the generator payments on top of their revenue per MWh from selling electricity on the wholesale market, due to this the mechanism would be much more costly than the CfD. It also gives more benefit to the renewable generator than to the consumers since it would always receive extra payments, making it less cost-effective and not striking a balance between the two also increasing the fluctuation in the electricity market. (Friends of the earth, Dr David Toke,

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