Principles for the formulation of policy for the Electricity System

Avedore power plant, Denmark

Government actions

Consideration of the Electricity System requirements shows that they are dominated by public good issues. Some people believe that market forces will ensure adequate plant to satisfy Security of Supply. There is however no market mechanism that addresses this issue.  It is a public good issue.  Therefore the risk for Security of Supply, i.e. that peak demand may not be satisfied, is worryingly high. This is a matter of serious concern to us all.

The present GB situation is:

  1. A large proportion of electricity generation plant will require to be replaced in the coming decade.
  2. No mechanism is in place to ensure that replacement of this plant will satisfy a Security of Supply Standard.
  3. Having an acceptable risk of Security of Supply is of critical importance to the nation.
  4. There is an urgent need for the Government to make a reliable assessment of Security of Supply so that (a) the degree to which market forces are leading to a secure supply is known and (b) the Government can take appropriate action if Security of Supply is forecast as being likely to be compromised.

Present GB government actions.

The UK government is proceeding with Electricity Market Reform, two of the key objectives being to encourage low-carbon electricity generation and improve security of supply by ensuring adequate capacity margin. It plans to pursue these objectives through “Contracts-For-Difference” for low carbon generation and “Capacity Mechanisms” contracted in accordance with Delivery Plans which are to be published every  five years, commencing Dec 2013  (draft for consultation in July2013), by  the “System Operator” – National Grid.

The Scottish Government is pursuing a 2020 target of total generation from renewables equalling or exceeding total electricity consumption in Scotland (loosely known as the 100% renewables target). It has published a draft Electricity Generation Policy Statement which indicates that this target is feasible by a mix of renewable energy (predominantly wind) and thermal generation from fossil fuels with CCS (Carbon Capture and Storage) and with much strengthened interconnection to England.   

The situation in North America

An example of a (trans-national) body that addresses Security of Supply is the North American Electric Reliability Corporation that imposes strict standards for Security of Supply over the whole of the USA, Canada and parts of Mexico (more). The need for such an organisation was prompted by events.  There is a clear need for a similar organisation for the GB System.  It seems very unwise to wait for events to make us realise that such control is necessary?

Potential success of government actions

Government organisations, when properly constituted, can deliver project outcomes to a high standard - see, for example, 1926 Electricity Act. This Act ensured that those who made recommendations to the Government, i.e. those who carried out the reliable studies, were able to take an independent view of the situation. Such a context is fundamental to the achievement of balanced judgements that characterise reliable outcomes.

It is recommended that a reliable study of market arrangements should be commissioned. This document describes an option that could be used in such a study.