We are working with the Government in its changes to the electricity market to make sure:
- The UK can generate enough electricity for everyone in the future, as half of existing generation capacity is due to close over the next 15 years
- The UK can generate more electricity from low carbon sources to meet climate change commitments
- With all the necessary investment, electricity can remain affordable for UK households and businesses
The following two parts of the Electricity Market Reform are now becoming law:
- Contracts for Difference make it more attractive for companies to invest in low carbon electricity generation by guaranteeing a fixed price that such electricity will be sold for - known as a “strike price” – whilst also keeping the price affordable for residential and business customers.
- The Capacity Market was introduced in August 2014. Its main aim is to make sure there is sufficient investment in new and existing power stations so there is enough working capacity to meet the UK’s demand for electricity all day, every day. It should also help keep prices affordable when demand is very high.
There are lots of costs that make up the price you pay for your electricity. They include the price of wholesale electricity and a number of levies and charges.
The cost of Contracts for Difference and Capacity Market will be spread across all energy suppliers and will form a small part of your electricity bill. You can see a full breakdown of what makes up your bill
It’s difficult to predict the precise cost of these schemes. If you’re a residential customer, it’s estimated the cost of Contracts for Difference could start at £2-3 a year in 2015, rising to £15-30 a year by 2020. The cost will begin to form part of your bill from April 2015.
The Capacity Market is designed to reduce overall electricity costs by making sure wholesale prices don’t increase rapidly when demand for electricity is high.