Reform Electricity Markets or No Wylfa B

by David Phillips
(Anglesey)

The UK electricity market needs urgent reform if Wylfa B on Anglesey, along with other new nuclear build projects in Britain, are to succeed, says a KPMG report.

The detailed KPMG report suggests Britain is seriously at risk of missing its low carbon emission targets without a determined push ahead with investment in new nuclear power generation.

Given nuclear energy is the only significant source of low carbon baseload electricity supply, it has an essential role in delivering a secure and affordable mix of low carbon power generation.

While the KPMG report confirms nuclear as being the cheapest form of low carbon electricity, it emphasises need for major changes to how electricity markets currently operate.

If these changes are not forthcoming, then large private sector investment needed for new nuclear build may not materialise.

Up to now only renewable energy schemes have benefited from favourable market interventions. There now seems to be a view that reforming electricity markets in a way which recognises all low carbon generation may be the best way forward.

Among the possible mechanisms are premium tariffs or some form of obligation certificate.

While the KPMG report ruled out use of government subsidies, which reflects the view of Energy Secretary Chris Huhne, it still drew some hard-hitting conclusions.

If large scale new nuclear build is to go ahead in Britain, it could cause a financial strain for the various committed consortium partners, which include firms like EDF, E.ON, RWE Npower and others. So a new approach may be required, attracting extra and different forms of finance.

The UK Government must be much clearer about how it will achieve its Climate Change Act targets. In the scheme of things there is an inevitability that major nuclear build is needed.

Simply having a carbon price may not be enough to ensure a green light for investment given the required scale of funding commitments.

A decision needs to be made on whether there will be one market for all low carbon sourced electricity or separate markets for the different technologies.

With a looming energy gap and a need to meet our climate change targets, the UK Government must take the initiative on this major policy area.

The fate of Wylfa B and the Anglesey economy now rests on the Energy Secretary being decisive on new nuclear and making the right calls as set out in the report.


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