Today, the UK Government rolled-out ambitious plans for electricity market reforms - including the complete overhaul of a quarter of the UK’s electricity generation, and some of the most aggressive plans for nuclear power and offshore wind in the world. However, the complexity and sheer scope of the plans detailed in the white-paper have caused many to question whether these goals can move through Parliament. In today’s GR Energy and Climate Brief, Garten Rothkopf breaks down the most important aspects of the plan.

The UK Department of Energy and Climate Change published a detailed White Paper for electricity market reforms today. The policy paper, supplemented by multiple studies and supporting documents, lays out the approach to the Cameron government for emissions reduction and power sector reforms to achieve 2020 targets for renewable energy and 2030 and 2050 targets for carbon reductions. The plans now will move to Parliamentary debate, where the focus is will be cost, jobs and impact on power supply and reliability. Today’s GR Energy and Climate Brief breaks down five key things to know about the UK Electricity Reform White Paper.

Coal Hit In Both Directions: One of the most significant elements of the government proposal is a new Emissions Performance Standard (EPS) which will affect any new fossil fuel generation plants, in particular coal generation. The cost of coal generation is already facing increases as a result of the recently announced carbon price floor (CPF) on fuels, which will start at £15.70/tonne CO2 in 2013, and a requirement for CCS installation on new plants. The EPS proposal imposes an annual plant level emissions limit equivalent to 450g CO2/kWh on new fossil-fuel power stations (except CCS demonstration plants) starting in 2013. If enacted, this additional hurdle would mean that coal plants would face significantly higher costs on both their inputs and outputs, forcing a dramatic shift away from the coal generation that the UK power system relies upon. The impact of the increased costs is anticipated to take 25% of coal capacity offline.

Nuclear is a Big Winner:Nuclear emerges in this plan as a clear winner, not only favored because it provides baseload capacity to replace coal, but because the government is speeding the permitting process. Nuclear power currently supplies 18% of the UK’s electricity, but of the ten existing power plants (11GW in total) nine will reach the end of their working lives by 2023, threatening to produce a significant energy gap unless action is taken to replace them. The government has given preliminary approval to eight sites for the construction of new nuclear plants by the end of 2025 and is looking to speed up permitting. This government's endorsement and expansion of nuclear put it in stark opposition to the Merkel government in Germany, as well as other industrialized countries, though all are seeking to reduce coal consumption and meet carbon targets.

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