News Center
Contact Us
Industry News
Home > News Center > Industry News

UK electricity market reform help Chinese policymakers

    One of the important areas of energy cooperation between the two countries as Britain, the British Embassy and external experts drafted the "UK Electricity Market Reform - the price difference between the contract," the summary report (Chinese version only). The report has been sent to China's major energy policy and planning departments - China National Energy Board and its think tank.
    China in the new round of electricity market reform its infancy, the UK electricity market reform policies for China's policy-makers is a good reference, Chinese electricity market reform will promote the development of China's renewable electricity.

    UK electricity market reform is to help the government achieve an adequate supply of the electricity, reduce carbon emissions and to ensure that the policy objective and reasonable electricity costs and other aspects. Although the British electricity market has always had enough spare capacity to guarantee security of supply, but due to large-scale intermittent renewable energy access, a large-capacity power plant shut down, as well as the electricity market conditions are not given the necessary investment in power generation facilities certainty, UK electricity market may face capacity tension. In addition, in order to achieve 15% by 2020 renewable energy target, the UK needs to ensure that 30% of electricity from renewable energy sources. However, under the current market conditions, investment compared to traditional low-carbon electricity generation projects more risky projects. To address these challenges, the electricity market reform plans to introduce market capacity (Capacity Market) and contracts for differences (Contracts for Difference) two main mechanisms.

    Capacity market economy by giving reliable capacity to pay, make sure you have sufficient capacity in short supply when the electricity market in order to ensure the safety of the power supply. Britain's electricity supply capacity market open end and demand-side resources (for example, demand response and energy storage). The first auction will be conducted in the capacity market in 2014, and plans to be delivered in the winter of 2018/19.

    CFDS is designed in order to give all low-carbon electricity (including nuclear power, renewable energy and carbon capture and storage) of the most effective long-term support. Under the contract the difference, as usual power suppliers to sell electricity output by the electricity market, then get paid the difference (difference payment) electricity price and the exercise price (strike price) between. When the electricity market price is higher than the strike price, power suppliers need to return the difference between the exercise price and the price of electricity, thus avoiding excessive payments to generation companies. By giving investors greater certainty in terms of income, the difference can reduce the cost of financing the contract cost of the project as well as policy. CFDS policy program implemented from 2014 onwards, and run in parallel with the Renewables Obligation (Renewables Obligation) in 2017.
    UK electricity market reform will also be supported by a number of other related policies. This includes a minimum carbon price (Carbon Price Floor), carbon emission performance standards applicable to fossil fuel power plants (Emissions Performance Standard), incentives to save energy and to support market liquidity measures and independent power producers to enter the market of energy renewable.
In institutional settings, the system operating mechanism (the System Operator, the United Kingdom National Grid) assumed the role of the UK electricity market reform execution side, the amount of content and provide analysis of the market and the spread of government contracts. In the post contract system, the government will set up and have a private company that contracts for differences parties (CfD Counterparty), is responsible for signing and managing contracts for differences and the management contract to pay the difference.
    The report for the post contractual mechanisms under the UK electricity market reform summarized finishing. By analyzing the government to seek advice about the post contractual mechanisms and related government documents, this report summarizes the UK Department of Energy and Climate Change at the strike price and the reference price determined, post contract length, electricity supplier obligations, contracts for differences, as well as the distribution of project implementation delivery and other major aspects of policy considerations.