The role of electricity demand reduction in reducing the costs of policy delivery


The Government must finalise the electricity market reform (EMR) Delivery Plan by the end of the year. The current political focus on energy costs makes it particularly important that this plan is focused on delivering best value investments for consumers. Unfortunately, financial markets continue to be challenging and it is possible that the Government will have to raise support levels for renewable technologies (particularly offshore wind) if it is to deliver 2020 renewables targets. This in turn threatens to violate the self-imposed levy control framework (LCF) spending cap and the Government will not want to be forced to choose between renewables targets and LCF spending.

This paper argues that there is a solution to this dilemma in the form of a demand reduction target that can be included in the Delivery Plan. Analysis of the draft Delivery Plan is presented that suggests that a demand reduction target can provide ample scope for manoeuvre in increasing renewable support levels and/or reducing LCF costs.


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