2012 Electricity Market Law Still Having A Major Impact in the UK

2012 Electricity Market Law Still Having A Major Impact in the UK

The Key Energy Market Reform in the UK occurred in 2012 with the Electricity Market Reform, composed of two major parts. First, it ensured a capacity market for electricity. This promotes investment in low-carbon energy supplies to ensure future energy demand can be met when renewable energy supply is low. Second, there was the creation of Contracts for Difference which were introduced in 2013. New low-carbon energy suppliers stabilize their revenue by receiving funding from the government until the price of their energy lowers to the point of the “strike price” after which they start to repay the government, maintaining a consistent revenue for the supplier and a sustainable contract for the government.

The market reform successfully promoted growth in the low-carbon electricity market, and the UK has now become one of the leading markets for low-carbon technology. Despite an 8% rise in electricity consumption in the UK, emissions from electricity supplies have reduced by over 50%. Overall, the EMR costs £110 billion pounds from government funding.

However, since 2015 there have been no additional energy market reforms of this kind. In 2015, there have been small-scale reforms, such as licensing provisions for domestic gas and oil to help protect the sectors from international competition. However, nothing on the scale of the Electricity Market Reform in 2012. It seems the case that any further intervention at this stage, as these policies are just beginning to reap their benefits, would be more disruptive than beneficial to the UK at present.


Activity Rating: *** Long-lived Positive Impact


This Post was submitted by Climate Scorecard Country Manager: Zara Holden  

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