Electricity Market Reform (EMR)
What is Energy Market Reform?
To achieve these targets and encourage growth of secure and sustainable energy generation in the future, the government introduced legislation named Electricity Market Reform (EMR).
The cost on investment in the energy sector was estimated by the government to be in excess of £100 billion before 2020 as part of the transition towards a ‘green’ future. Capital raised through EMR will be used to create generation with lower carbon energy sources that will help realise the emission reduction targets. New and existing generation will also be supported by the legislation so that the UK continues to have a reliable source of electricity.
The government predicts as a result of EMR a further 4-5% will be added to the end users electricity invoice. At present, third party costs (TPCs) make up more than half of the standard electricity invoice and are set to continue increasing. This is largely as a result of two charges introduced in August 2014; Contracts for Difference and Capacity Market which are now appearing on invoices.
Four main mechanisms behind EMR
Opportunities for Electricity Consumers
Consumers with onsite generation that are capable of providing Demand Side Response (DSR) capacity by load-shifting or reducing consumption are able to participate in the annual capacity auctions.
The latest T1 and T4 auction concluded in January of this year. A consumer with 1MW generation capabilities would have received typical revenues achieved through Capacity Auctions: