The first round of CfD allocations under GB’s Electricity Market Reform(EMR) were announced recently. Following this there have been various comments on the results, and also other aspects of EMR, such as the Capacity Market.

The Energy and Climate Change Committee recently published this report reviewing the implementation of EMR to date. The report has differing views on different parts of EMR. The report is positive in terms of actual implementation and the meeting of the ambitious timeline, especially when it comes to CfD allocation. However it notes that the speed of implementation, and also the complexity of it has disadvantaged smaller players.  The fact that auctions only take place once per year also makes it harder for small players who have not succeeded in a round to “stay afloat” until the next.

The report also highlights issues in the Capacity Market. It notes that the design of the market would appear to favour fossil fuel generation, and that 80% of the first round was allocated to fossil fuels, including coal. As  result, it would appear that CfDs and the Capacity Market are pulling in opposite directions in terms of moving the generation mix towards renewables. This article on reNews also backs this up.

The report also talks about the fact that the Levy Control Framework(LCF), which is designed to control the funding that can be passed on to retail consumers, is currently only budgeted until 2021. This creates uncertainty for investors, since it means that the level of funds available for future CfDs is not clear. A more detailed article on the issue can be found in this article on 4COffshore.

Whilst EMR is still at the early stages, it would appear that some refinement will be necessary if it is to achieve its objectives. It is likely that this will occur after the UK elections in May when any potential policy changes will be better understood.