'More incentives needed for nuclear', says Energy Minister Charles Hendry
The electricity market will need at least three major changes to pave the way for new nuclear power in the biggest industry shake-up since privatisation, according to the Energy Minister.
'More incentives needed for nuclear', ays Energy Minister Charles Hendry Photo: Alamy
Charles Hendry, the Tory MP, has told The Daily Telegraph that two more incentives would be needed for nuclear beyond the Government's plans for a "carbon floor price". This measure, due to be set out in a key paper on electricity market reform this month, will artificially raise the cost of carbon allowances to penalise fossil fuel generators and reward low-carbon power.
But Mr Hendry said that on top of this reform, he is "very much" in favour of capacity payments for low-carbon electricity generation – an option championed by EDF. This would reward companies for making their electricity generation capacity available to the grid, even if it is just as a back-up.
Mr Hendry acknowledged that this would still not be enough to persuade nuclear companies to build their plants in the UK.
"There will still need to be an additional third mechanism," he said, adding that an obligation on suppliers to provide a certain proportion of low-carbon power or contracts-for-difference in the electricity market are two key options under consideration.
"This is one of the most important things we will do this parliament and it will be the most fundamental reform since privatisation 30 years ago," the minister said.
Mr Hendry said the Government will propose a number of options to industry for further consultation, but will give a "significant steer" as to its preferred measures to encourage nuclear and other low-carbon power.
The reforms are a sign that the Government has been listening closely to industry concerns.
EDF is planning to build Britain's first nuclear power station by 2018, but its chief executive, Vincent de Rivaz, has long been pushing for market reform to ensure that the £20bn investment is affordable.
The Government wants 10 new nuclear power stations, but there are still a number of obstacles - including market reform - to be ironed out before they are built.
A briefing paper prepared by the Office of Nuclear Development (OND) recently showed that there has already been "some slippage of about six to nine months" due to planning delays, the election and the long approval process for reactor designs. Mark Higson, chief executive of the OND admitted to the delay, but insists the current 2018 timetable is still achievable.
Separately, the Government published its annual security of supply outlook on Thursday, predicting that Britain would be well supplied with gas this winter.
"The outlook for security of gas supply is broadly benign in the near term," it said. "This does not mean that it is risk-free; there are risks, both in the short term, and towards the second half of the decade, when some uncertainties remain." The paper also warned that investment in gas storage projects "might slip".
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