Download Energy UK response to BEIS Consultation

Energy UK response to BEIS Consultation Capacity Market: Proposal to Ensure Fair
Competition in Future Capacity Auctions
Relating to Certain Risk Finance Schemes
20th October 2016
About Energy UK
Energy UK is the trade association for the GB energy industry with a membership of over 90 suppliers,
generators, and stakeholders with a business interest in the production and supply of electricity and
gas for domestic and business consumers. Our membership encompasses the truly diverse nature of
the UK’s energy industry – from established FTSE 100 companies right through to new, growing
suppliers and generators, which now make up over half of our membership.
Our members turn renewable energy sources as well as nuclear, gas and coal into electricity for over
26 million homes and every business in Britain. Over 619,000 people in every corner of the country
rely on the sector for their jobs with many of our members providing lifelong employment as well as
quality apprenticeships and training for those starting their careers. The energy industry adds £83bn to
the British economy, equivalent to 5% of GDP, and pays over £6bn in tax annually to HMT.
Executive Summary
Energy UK and our members welcome the opportunity to respond to the Department for Business,
Energy and Industrial Strategy’s (BEIS) consultation into the Capacity Market: Proposal to Ensure Fair
Competition in Future Capacity Auctions Relating to Certain Risk Finance Schemes. Our members are
broadly supportive of the Government’s recommendations and appreciate the efforts made by the
Government to remove distortions from the market and their associated selective competitive
advantage however we would encourage any efforts to provide stability and investment security to the
market.
Response to Questions
1. Are there any aspects of this proposal that you think will not work in practice?
Given our previous response to DECC’s March consultation on Further Reform to the
Capacity Market, the majority of our members are pleased that a prospective approach has
now been adopted. As a matter of principle, where possible, Energy UK believes
retrospective policy actions should be avoided. However, some of our members remain
concerned that the proposal to put 2014 and 2015 auctions results out of scope may not be
compliant with state aid rules.
To promote competition on a level playing field in the CM auction and to ensure that no further
overcompensation occurs, it is clear that the proposed prospective solution should be adopted
as soon as is practically possible.
2. When making the funding declaration, do you foresee any issues with declaring the
total Capital Expenditure incurred, or expected to be incurred, with respect to the
Prospective CMU from investment received under a risk finance scheme? Or any
issues with submitting an updated declaration if necessary?
As a trade association Energy UK does not have any capacity which would be affected by this
proposal. For further information please refer to the responses submitted by our membership.
Energy UK, Charles House, 5-11 Regent Street, London, SW1Y 4LR
www.energy-uk.org.uk
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3. To help us understand the impact of the proposal, please indicate if you planning on
bidding in capacity that would be affected by this proposal? If so, what volume of
capacity may be affected?
As a trade association Energy UK does not have any capacity which would be affected by this
proposal. For further information please refer to the responses submitted by our membership.
4. Is there anything that we should have particular regard to in relation to the payment
and secondary trading mechanics when making the detailed technical amendments to
implement these proposals?
Energy UK and our members ask that any further amendments be included before October
2017, the commencement of the delivery year. Furthermore we ask that any changes be
reflected in the Capacity Market recovery levy.
Following engagement with our members the majority agreed that the T-1 auction should be in
scope as the existing projects holding VTC and EIS contracts would not have been made on
the assumption that a T-1 auction would be held. The T-1 auction has been designed
to incentivise the accelerated delivery of new-build capacity that would have already been
awarded capacity agreements in the T-4 2014 and 2015 capacity auctions. We feel that
leaving the T-1 auction out of scope would exacerbate the issue of overcompensation,
creating a cost which would be funded by the consumer. However, some members’ positions
differ from this so please refer to their consultation responses for their positions.
For more detail about the questions posed within the consultation document please refer to the
responses submitted by our members.
Should you have any questions regarding this consultation response then please do not hesitate to get
in touch via the details below.
I can confirm that this response may be published on BEIS’s website.
Yours sincerely,
Joshua Atkins
Policy Manager, Generation
Energy UK, Charles House
5-11 Regent Street
London
SW1Y 4LR
[email protected]
Energy UK, Charles House, 5-11 Regent Street, London, SW1Y 4LR
www.energy-uk.org.uk
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