Draft Electricity Capacity (Amendment) (No. 2) Regulations 2025

Andrew Bowie Excerpts

Wednesday 9th July 2025 General Committees

[Andrew Bowie (West Aberdeenshire and Kincardine) (Con)]

It is a pleasure to serve under your chairmanship, Mr Vickers, and to be in the august company of the double award-winning Minister—the Scottish MP of the year, as of yesterday evening. The competition was very stiff.

The capacity market scheme was introduced in 2014 as part of the electricity market reforms to ensure security of electricity supply by providing payments for reliable sources of dispatchable generation or, in some cases, demand reduction. As we saw in January, a renewables-dominated system increases the need for capacity market generation. The system, which is designed to insure the market during periods of electricity system shortage and stress, is increasingly significant and increasingly costly as intermittency increases.

These regulations will allow unabated gas generators to exit their capacity market obligations without penalty for the purpose of retrofitting carbon capture, usage and storage and transferring to a dispatchable power agreement outside of the capacity market. The rationale for this is to allow generators to convert unabated gas to power with CCUS in order to decarbonise the UK’s electricity generation. So far, so good. We support that ambition in principle, as we believe in a cleaner energy system.

However, we also believe in delivering an energy system that is secure and affordable, on which we have some concerns. Namely, how will this impact energy bills? The regulations intend to allow unabated gas generators to transfer from existing capacity market agreements to a contract for difference mechanism to power CCUS, thereby entering a dispatchable power agreement.

If dispatchable power agreement contracts are more expensive than the average cost of electricity, higher prices will be locked in, and the cost of this mechanism will necessarily filter through to billpayers. Energy bills are composed of wholesale costs, network charges, contracts for difference subsidies, balancing costs such as curtailment payments, and capacity market payments. Under the Government’s clean power 2030 plan, those costs are all set to rise. Bills will go up.

This week, Ofgem announced a £24 billion investment in the electricity and gas grid, including a 2,700-mile pylon expansion, necessitated by, in Ofgem’s words, the need to

“handle the flow of electricity from new renewable sources.”

Onshore wind and solar panels need an expensive expansion of our infrastructure due to their dispersed locations, costing billpayers money. This is not cheap, and it will not bring bills down.

Contracts for difference payments are set to rise, while developers still await news of the administrative strike price for the next allocation round. We know that a high reserve price will drive up consumer bills. With increasing onshore and offshore wind bringing higher levels of intermittency into our systems, curtailment payments are set to increase, at least in the medium term. Last year, billpayers spent £1 billion balancing the grid by turning wind turbines off at times of over-generation, and now we have these capacity market changes.

The increase in intermittent renewables on stream in the UK must be shored up by increasing capacity market payments. Unfortunately, this Government continually prioritise climate targets over secure and affordable energy, and billpayers are paying the price. Can the Minister please tell us what impact the Government’s clean power 2030 payments will have on capacity market payments? Are the Government still committed to reducing energy bills by £300, and will the Minister reiterate that commitment?

There is no costing associated with these regulations or with clean power 2030 overall, as that would prove that the Secretary of State’s commitment to the unachievable targets he has set himself is pushing bills up.

I do not wish to stand in the way of these regulations. However, I must put on record our deep concerns about the impact of clean power 2030 and all these changes on consumer bills and the UK’s overall energy resilience.