The reforms will address uncertainty and stress suffered by people all over the country in recent years caused by high energy bills resulting from the UK's dependence on fossil fuel markets controlled by dictators, presumably meaning Russia's Vladimir Putin as one example, although without referring to the Russian leader directly.
The government, correctly, has promised to 'double-down' on its clean energy mission in response to this situation, promising to give families greater control over electricity supplies with the assistance of clean, domestic, power generated in Britain, which in turn will lead to permanently lower energy bills.
In delivering this clean power system, the government has inherited the task of making a decision whether to retain the current national system, in which all areas in Britain pay the same wholesale price for energy, or implement an overhaul in which different areas of the country are divided into pricing zones, depending on their proximity to where energy is being generated.
A consultation to this effect began in 2002 and the government has now concluded that reforming the system, while retaining a single national wholesale price, is the right way to deliver a fair, affordable, secure, and efficient electricity system.
This morning (10th July ), the government sets out proposals that will ensure the benefits of clean power are felt by consumers in every part of the country, while giving businesses the stability and certainty they need to continue investing to upgrade UK infrastructure - boosting national energy security, creating tens of thousands of jobs, and growing the economy.
“Building clean power at pace and scale is the only way to get Britain off the rollercoaster of fossil fuel markets and protect families and businesses for good” said Energy Secretary Ed Miliband. "As we embark on this new era of clean electricity, a reformed system of national pricing is the best way to deliver an electricity system that is fairer, more affordable, and more secure, at less risk to vital investment in clean energy than other alternatives. Our package of reforms will protect consumers and secure investment as we drive to deliver our clean power mission through our Plan for Change."
This decision comes as the government takes a step closer to the clean power by 2030 target, delivering what the government calls the most significant investment in clean, homegrown power in British history over the last year, including approving projects that could power the equivalent of 2 million homes, although also including an expansion of new nuclear power.
The government intends to rapidly build the network, reform the planning system, and transform the grid connections queue to get the projects needed for clean power and economic growth. This will be based on driving forward the build out of new transmission infrastructure, with the implementation of new planning measures, that the country needs to build the clean power system the UK needs.
Alongside implementation of new planning measures, the government will determine where clean infrastructure is located, based on long-term needs. These changes will ultimately help to bring down energy bills, by making the current system more efficient, ensuring low-cost investment into cheap clean energy projects, and reducing the cost of running the electricity network.
The key parts of the reformed national package being announced today include:
Strategic Spatial Energy Plan:
The government has confirmed that the Strategic Spatial Energy Plan, to be published next year by NESO following consultation, will be at the heart of the reforms to improve the efficiency of the electricity system, under the national pricing model.
Commissioned by UK, Scottish and Welsh governments last year, for the first time the plan will set out how to best spread new energy projects across land and sea in Great Britain up to 2050. This will speed up development, cut grid connection waiting times and help to reduce costs, giving investors confidence in where to build and when.
Transmission charges:
Under the current system, the more that energy generators rely on the transmission network to move power to where it's needed, the more they will need to pay – in what are known as Transmission Network Use of System charges.
The government will work with Ofgem to drive forward a review of these charges to provide stronger incentives for investors to build generation where it is needed, supporting a cheaper system for all.
Crucially this will include changes to make existing charges more predictable for investors – as currently the charges vary year by year, which causes uncertainty during long-term projects and can drive up prices as developers price in the risk of volatility.
Improving the efficiency of the power system:
The government is already working at pace with the industry to rewire Britain and upgrade the country's outdated infrastructure to get more renewable electricity onto the grid and minimize constraint payments after over a decade of delay.
Independent advice from NESO confirmed that up to £4 billion in constraint payments, caused by historic failure to build the grid infrastructure the country needs, could be avoided by 2030, if critical network upgrades are accelerated to complete by 2030.
Many of these projects are already well into development, such as the Norwich to Tilbury transmission line, and the Sea Link offshore cable between Kent and Suffolk.
The government is also working with NESO to launch a consultation later this year on further reforms that will help to reduce the need for constraint payments. One potential measure could give NESO better access to smaller assets – such as battery storage sites – that can offer greater flexibility when balancing the grid.
NESO are also currently working with the wider industry to explore further options to help reduce the need for constraint payments – as part of their Constraints Collaboration Project.
Today's announcement also builds on wider schemes announced by the government that aim to ensure households can directly benefit from hosting clean energy projects.
Earlier this year, the government introduced measures in the Planning and Infrastructure Bill that will see eligible households within 500 meters of new or upgraded electricity transmission infrastructure receive electricity bill discounts of up to £2,500 over 10 years.
The Energy Secretary also recently set out plans for coastal and rural communities hosting clean energy infrastructure to receive a cash boost for new community facilities, better transport links and investment in apprenticeships.
The government's plans were warmly welcomed by UK clean energy trade associations, particularly Solar Energy UK, which strongly supports the Government's rejection of regional pricing zones, which would have made the price of power a postcode lottery, fragmenting the market and risking exacerbating regional inequalities. The government's package instead ensures every community shares the benefits of clean energy while providing the stability needed to unlock billions in private investment.
Solar Energy UK also says it is looking forward to a forthcoming consultation on how the UK can make better use of battery energy storage in the electricity system, which would stimulate the growth of the storage market and help to reduce constraint payments.
“This is a very positive day for both the solar and battery energy storage industries” said Chris Hewett, Chief Executive of Solar Energy UK. "Although there were good arguments either way, we had opposed zonal pricing as it would have introduced uncertainty and disrupted investment. It would also have been poorly timed, coming just as the wind, solar and battery sectors alike need to expand rapidly. The way is now clear for what we expect will be the largest contracts for difference auction yet, set to be held in a month's time. The seventh allocation round will set the stage for meeting the Government's growth targets for clean energy for 2030, delivering cheaper, cleaner and more secure power."
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