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Wind Power

Energy and Climate Change written question – answered on 20th June 2012.

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Photo of Chris Heaton-Harris Chris Heaton-Harris Conservative, Daventry

To ask the Secretary of State for Energy and Climate Change what assessment his Department has made of the potential effect of the promotion of wind power on the certainty of income for conventional generators.

Photo of Charles Hendry Charles Hendry The Minister of State, Department of Energy and Climate Change

Electricity market despatch modelling suggests that as more wind power comes on to the system, average wholesale prices will decline slightly, due to there being more low short-run marginal cost plant (i.e. wind) on the system. For example, research by Redpoint consultants for DECC in 2009(1 )examined a low renewable electricity scenario (reaching around 16% in 2020) and a high scenario (reaching around 29% in 2020). They found that average wholesale prices from 2011 to 2030 were 4% lower in the high renewable scenario than in the low. The average wholesale price that flexible conventional generators receive is likely to be higher than the overall market average as they will run more at periods of higher prices.

The Government is taking powers to introduce a capacity market which will be able to ensure that sufficient capacity is available to meet demand. Conventional generators would receive a relatively stable capacity payment instead of just relying on uncertain and volatile prices from an energy only market. This would help to increase certainty of income for conventional generators.

On 17 March the Secretary of State for Energy and Climate Change, Mr Davey, and the Chancellor of the Exchequer, my right hon. Friend Mr Osborne, announced plans to publish a new gas generation strategy in the autumn of 2012 to ensure investment in this sector comes forward, alongside the required generation in low carbon technologies. This was confirmed in the Budget on 21 March. The strategy will focus on the role of gas in the electricity market, and its aim is to attract investment in gas generation by overcoming any barriers, ensure energy security, meet the UK's carbon reduction targets, and make the best use of the nation's natural resources.

(1) Redpoint, 2009, Implementation of the EU 2020 Renewables Target in the UK Electricity Sector: RO Reform, available at:

http://www.decc.gov.uk/assets/decc/what%20we%20do/uk%20energy%20supply/energy%20mix/renewable%20energy/ renewable%20energy%20strategy/1_20090715120542_e_ @@_redpointimplementationoftheeu2020renewables targetintheukelectricitysectorroreform.pdf

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