Electricity Market Reform

During 2010 to 2015 the UK Government committed to a series of reforms (known collectively as Electricity Market Reform, or EMR) in order to, in the Government’s own words: ‘transform the UK’s electricity system to ensure that our future electricity supply is secure, low-carbon and affordable.’

EMR will deliver the low carbon energy and reliable supplies that the UK needs, while minimising costs to consumers. The reforms introduces two key mechanisms to provide incentives for the investment required in our energy infrastructure.

• Contracts for Difference (CfD) provides long-term price stabilisation to low carbon plant, allowing investment to come forward at a lower cost of capital and therefore at a lower cost to consumers.

• Capacity Market provides a regular retainer payment to reliable forms of capacity (both demand and supply side), in return for such capacity being available when the system is tight.