GB Electricity Market Reform: The

implementation challenges ahead

IAEE International ConferenceStockholm, June 20 – 22 2011

Dorcas BatstoneDorcas.batstone@elexon.co.uk

21 June 2011

UK Government Objectives

Decarbonisation

Affordability

Security of supply

Who are the key influencers?

The Government

DECC (Department of Energy and Climate Change)

HM Treasury

Committee on Climate Change

Energy and Climate Change Committee

Ofgem

What are the key requirements (and challenges) for implementation

What? When?

Cost? Who pays?

Dependencies

The what

Emissions performance targets

Carbon price support

Feed-in tariffs

Capacity payments

» And if that wasn’t enough there’s all this to contend with too!

•Retail market review•Smart metering•TransmiT•The Green Deal•Smart Grids•Cash-out review•EU developments

» What’s missing?

The what (2)

Demand side

The when

2050 - Reduce greenhouse gas emissions by at least 80%

Spring 2011 – White Paper on EMR proposals

2020 – Replace 25% of existing capacity

2020 – 30% of electricity from renewable sources

» 21 June 2011 – still no White Paper but what’s happened since?

Are we still on track?

FukushimaOil and gas

supply interruptions

Carbon price support

mechanism

» Best estimate is that £200bn investment is needed in new plant and infrastructure but how much will EMR cost?

» Regulatory impact assessment – indicative costs and benefits

•*20 year time period

How much will it cost?

Costs* (range) Benefits* (range)Packages £24bn - £27.3bn £20bn - £20.4bn

Security of supply £ 1.27bn- £ 1.98bn £808m - £929m

Decarbonisation £16.6bn - £24.1bn £9.9bn - £20.2bn

Who pays?

Not the Government

Generators and Suppliers Taxpayers

Consumers

» ‘Buy in’» Legislation (GB and EU)» Licences – obligations» Who sets prices (CfDs, auctions) – new Government

bodies?» Procurements – service providers» Commercial contracts – existing bilaterals and balancing

services» System changes – central and participant systems » Changes in customer behaviour

Dependencies

» It’s a challenge!

Conclusion

ELEXON

deliver the BSC

effectively, efficiently and economically

drive improvements

forefront of the

changes in energy markets

remaining independent

identifying and exploiting new

opportunities

benefit our

customers and stakeholders

leader in the efficient

transformation of energy markets

shared solutions to address common industry problems