About the Schemes
The Scheme Objectives
In 2011 the Government estimated that around £100 billion of investment was required by 2020 in the electricity sector alone, to both replace the UK’s ageing power stations and deliver secure low carbon electricity at a cost-effective price.
To achieve this, the Government set up the Electricity Market Reform (EMR) programme. Contracts for Difference (CfD) and Capacity Market are key EMR schemes.
Both schemes are funded by levies and charges on licenced GB electricity suppliers.
“Reducing the cost of energy cannot be an absolute objective. It is a relative one: it is about achieving the other two objectives efficiently.” – Prof. Dieter Helm, who was commissioned by the government in 2017 to write an independent report on the Cost of Energy.
CfDs are designed to:
Deliver the low-carbon electricity we need to meet the UK’s climate change targets at least cost to consumers.
Do this by attracting new investment into low carbon generation, and at the lowest cost.
The Capacity Market is designed to:
Make sure we have enough reliable capacity to meet our peak electricity demands (typically winter evenings) and at the lowest cost to consumers
- Only procure what is necessary using competitive auctions. These are open to both power generators who can commit to be available when needed, and to large electricity users, who agree to reduce their usage when needed.