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UK Electricity Market Reform

13 October 2014

EMR: Wheels in Motion

In April 2014, eight renewable energy projects were awarded Investment Contracts, the forerunner to the Contract for Difference (CfD). In due course, these projects will be transferred over to the CfD regime.

On 16 October 2014, the first CfD allocation round commences, with the first CfDs being signed as early as January 2015, subject to any mid-allocation round appeals. The attached “Contracts for Difference – On the Launchpad”, from Allen & Overy’s sixth Annual Energy & Infrastructure training day, outlines the Contracts for Difference application, allocation and auction procedure, as well as the implications for the wider energy market.

On 9 December 2014, the first auction process for the Capacity Market will begin, which seeks to protect consumers against the risk of electricity supply shortages by encouraging investors to put the adequate reliable capacity in place. “Capacity Market” below, also from Allen & Overy’s sixth Annual Energy & Infrastructure training day, reviews the operation of the Capacity Market, from pre-qualification and auction, through to delivery and payment.

EU Targets

In January of this year, the European Commission outlined its proposed 2030 climate change targets, namely a 40% cut in greenhouse gas emissions, a 30% increase in energy savings and an aim to get at the EU level 27% of energy used from renewable resources. EU leaders look set to agree to these targets later this month, with legislation to be implemented at a later stage. However, the prospective absence of a UK national renewables target has important implications for the foreseeable generation mix. 

Allen & Overy reports

UK Electricity Market Reform - Update July 2013
UK Electricity Market Reform - the Energy Bill (December 2012)
UK Electricity Market Reform - the draft Energy Bill (June 2012)
UK Electricity Market Reform Proposals
UK Electricity Market Reform - White Paper
Update on UK Electricity Market Reform - Liquidity Proposals

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