The Commission for Energy Regulation, CER, in discharge of its duties under the Electricity Regulation Act 1999, is required to have regard to the need, inter alia, to promote the use of renewable, sustainable or alternative forms of energy. In addition, the regulator is required to ensure that the system operator gives priority to generating stations using renewable, sustainable or alternative energy sources when selecting generating stations.
I am empowered by section 9(1)(a) of the Electricity Regulation Act 1999 to issue a policy direction to the CER in regard to electricity trading arrangements. This power was exercised by the then Minister for Public Enterprise in July 1999, on foot of which regulations were made by the CER on 17 February 2000, which provide for an interim trading system to enable new entrants to participate effectively in the market, pending full market opening in 2005. The CER decided to accelerate the review required by that policy direction so as to provide existing and potential market participants with an increased level of certainty required for investment purposes.
Accordingly, on 16 July 2003, the CER made the Electricity Regulation Act 1999 (Market Arrangements for Electricity) Regulations 2003 with my consent. These regulations establish the new system of trading in electricity, that is the mandatory centralised pool, and pave the way for the detailed rules and procedures necessary to give effect to the new market arrangements in a fully liberalised market. The question of a policy direction to the regulator does not arise at this stage.
The detailed design of the new market arrangements in regard to renewable energy generation, CHP and embedded generation in the new market arrangements, taking account of the specific characteristics of green energy, has been the subject of recent extensive public consultation by the CER. The CER's consultation paper highlights the issue as to whether renewables or CHP could be more effectively supported through a mechan ism outside the market arrangements, through preferential treatment or via special rules under the trading arrangements. The CER has indicated that it favours supporting renewable and CHP plants outside the trading arrangements to allow true market signals to be seen, minimise market distortion, minimise system and market operation costs to the final customer; and afford greater transparency.
Consideration is being given by the CER to comments, submissions and representations received by it on foot of that process. In tandem with this exercise, I will shortly publish a detailed consultation document on the promotion of renewable energy technologies into the next decade and beyond. This document will, among other things, concentrate on the market's view on future targets and future support mechanisms for renewable energy technologies. I will be setting out possible market support mechanisms and consulting the industry and the public on the best way forward.