1. Energy Policy Group Developing the UK energy market: overview and assessment Bridget Woodman Energy Policy Group, University of Exeter b.woodman@exeter.ac.uk

2. Energy Policy Group State of play Energy policy is about balancing objectives – Security – Affordability – Environment There will always be shifts in relative importance – But we haven’t yet managed to get the balance right

3. Energy Policy Group Will anything change? We want a consumer-led, competition focussed energy system that has energy security at the heart of it … Energy security has to be the first priority. It is fundamental to the health of our economy and the lives of our people. No form of power generation, not even gas-fired power stations, can be built without government intervention. We will not support offshore wind at any cost… The industry tells us they can meet that challenge, and we will hold them to it … No more blank cheques Nothing on heat, energy efficiency, demand management, market reform Gas Nuclear Offshore wind Going up Going down Other renewables Heat Energy efficiency Demand management

4. Energy Policy Group Thinking about the future Current policy responses are about fire- fighting – CMA investigation – Cutting renewables and demand-side subsidies – Subsidies for fossil fuels No evidence of a longer term strategy designed to meet a range of future imperatives – Reducing emissions – Rising fossil fuel prices – Enabling new energy systems to develop Technologies, businesses, practices, regulations – Increasing integration of European markets

5. Energy Policy Group Is the future already here? The existing market concept dates from an era in which large- scale, centralised power plants, largely fuelled by fossil fuels, had the key aim of supplying every home and business in a limited area – typically a Member State – with as much electricity as they wanted, and in which consumers – households, businesses and industry – were perceived as passive. Today, the move towards decentralised generation increases the number of involved players and changes the existing market roles. The electricity market needs to adapt to this new reality; it needs to fully integrate all market players – including flexible demand, energy service providers and renewables. One concrete example is the flexibility that enables industrial consumers to participate in the market and profit directly from increased competition. It needs an effective regulatory and governance framework which reduces the need for interventions such as capacity mechanisms. http://ec.europa.eu/energy/sites/ener/files/documents/1_EN_ACT_part1_v11.pdf

6. Energy Policy Group What do we really need to happen? Demand side participation Interconnection Learn lessons from others Rebalancing of policies for low carbon generation Redesign the rules and incentives which maintain the current system All framed by a long term strategy … this isn’t what we got yesterday

7. Energy Policy Group Thanks