Contribution
I thank noble Lords for their comments and their general support for these regulations, which, as I said in my opening remarks, are technical in scope. This Government are steadfastly committed to maintaining our electricity security and creating viable routes for unabated gas plants to decarbonise. As I have set out, the capacity market is our main tool for ensuring security of electricity supply and has already secured the majority of Great Britain’s capacity needs up to 2028-29.
The Government continue to believe that the capacity market is an effective insurance mechanism providing secure and affordable electricity that families and businesses can rely on. The Government remain committed to ensuring that the right policy tools are in place for delivering a secure and affordable electricity system as we transition to net zero. This includes regularly assessing the performance of the capacity market and exploring improvements to the scheme. This instrument seeks to establish a first decarbonisation pathway for unabated gas plants in long-term capacity market agreements, allowing them to exit the agreements without penalty to transfer to a dispatchable power agreement and facilitating conversion to gas-fired power with carbon capture and storage once the technology is available. This will better align the capital market with our clean power objectives and provide gas plant operators with a future decarbonisation route for their assets. This instrument also seeks to improve the clarity of the legislation by revoking provisions in the secondary legislation that are now redundant.
I want to respond to some of the questions. I welcome the support of the noble Baroness, Lady McIntosh of Pickering. All responses to the consultation were considered when finalising these proposals. On her question on the specifics of the consultation, a few respondents noted market volatility, speculative bidding behaviour and the impact of auction dynamics. One response noted that the proposal created an unfair commercial advantage.
In response to the questions posed by the noble Baroness, Lady Coffey, these changes to the capacity market will allow us to maintain security of supply in a way that is cost effective for consumers. We are not expecting the changes to increase the cost of the capacity market, so there will be minimal impacts on consumers.
I also welcome the support of the noble Earl, Lord Russell. In terms of demand to convert the power of CCUS, the managed exit pathway is subject to transport and storage capacity, value for money and affordability. Subject to this SI being made, plant will be able to utilise this pathway from the first transfer notice window after January 2026, with the first opportunity for unabated gas plants to leave the capacity market being in October 2027. Approximately 4.4 gigawatts of capacity is currently eligible to use this pathway, subject to successful bilateral negotiations. The next stage of the CCUS programme includes further building out of the first two track 1 clusters: HyNet and the East Coast Cluster. I welcome the support of the noble Lord, Lord Offord, for these measures.
Energy security is a priority for the Government. The capacity market is an effective insurance mechanism and is worth paying for, providing security and affordable electricity that families and businesses can rely on. The alternative, not doing something, would cost us more than doing this. The capacity market is the UK Government’s main tool for ensuring continued security of electricity supply. The capacity market is technology neutral, providing incentives for all forms of capacity, including generation, storage, consumer-led flexibility and interconnection, to be on the system to deliver when needed. To date, the capacity market has contributed to investment of about 19 gigawatts of new flexible capacity needed to replace older and less efficient plant as we transition to a net-zero economy. Once again, I thank noble Lords for their points in this debate.