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U.K. to Pursue Electricity-Market Law to Boost Low-Carbon Plants

The U.K. plans to overhaul its electricity market as the government seeks to prevent spikes in natural-gas prices and spur investment in lower-emitting technologies.

“My government will propose reform of the electricity market to deliver clean and affordable energy,” Queen Elizabeth II said today. The speech by the reigning British monarch sets out the government’s legislative agenda for the year and marks the start of the next session of Parliament.

The Electricity Market Reform bill will include long-term contracts that give power producers guarantees to help them attract finance for offshore wind turbines, nuclear reactors and carbon-capture and storage projects. British utilities need to spend as much as 110 billion pounds ($177 billion) to replace aging power plants and upgrade transmission networks by 2020, the government has said.

The U.K. plans to build 18,000 megawatts of offshore wind power and two new reactors by the end of the decade, while replacing current generation and upgrading the grid. About half its coal-fed plants are due to close by 2016 and all its nuclear stations are scheduled to shut by 2035. The U.K. gets about 20 percent of its power from 10 atomic plants. All but one reactor are owned by Electricite de France SA and Centrica Plc.

Power Prices

U.K. power prices may jump 66 percent by 2020 as fossil-fueled stations close and carbon policy raises generation costs, according to Credit Suisse Group AG.

Power prices may increase to 83 pounds a megawatt-hour by 2020 from about 50 pounds this year, Mark Freshney, an analyst at Credit Suisse in London, said in a report yesterday.

“We’re not in danger of capacity shortages in the next two to three years,” Tim Yeo, a Conservative lawmaker and chairman of the cross-party Energy and Climate Change Committee, said in an interview last week. “The problem comes in the 20-teens if we haven’t started building.”

The bill will also propose the creation of a capacity market, which would reward companies for running plants to back up intermittent wind generation. Other measures include adopting a nationwide emissions-performance standard and setting out strategic priorities for the energy industry.

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