Energy: Prices

Department for Business, Energy and Industrial Strategy written question – answered on 24th March 2017.

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Photo of Julian Knight Julian Knight Conservative, Solihull

To ask the Secretary of State for Business, Energy and Industrial Strategy, whether his Department has carried out an assessment of changes in investor confidence caused by Ofgem's proposal retrospectively to remove long-standing triad incentive payments from committed 2014 and 2015 capacity market contracts.

Photo of Jesse Norman Jesse Norman Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

The review of embedded benefits related to Transmission Network Use of System demand charges is a matter for Ofgem, as the independent regulator. Ofgem is consulting on a draft impact assessment which considers various impacts of its proposed reforms.

The Department has received a number of stakeholder representations regarding the review of embedded benefits. These suggest that many embedded generation projects with capacity agreements from the 2014 and 2015 auctions will be largely unaffected; but some may be affected if they have assumed current levels of embedded benefit over a longer term.

The Capacity Market exists to provide back-up supply when needed.

Holders of capacity agreements are of course subject to strict termination fees where they are unable to fulfil their agreements. The Government remains confident that these obligations, alongside the future one-year-ahead auction, can be used effectively to mitigate any risks to capacity that arise between the four-year-ahead auction and the delivery year, so that security of supply is maintained.

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