Ofgem has confirmed the need to act to deliver both security of supply and environmental objectives at affordable prices beyond the middle of this decade.

The Energy Regulator published its Project Discovery conclusions after extensive consultation and analysis.

Prompt action will ensure that consumers do not pay more than is necessary and also allows time for a wider range of reforms to be considered.

Ofgem has put forward a wide range of options for further consultation, including improved market signals, obligations on suppliers and capacity tenders to give greater confidence to help meet our carbon targets. Other options also include more structural reform ranging from a centralised renewables market through to a central buyer of energy.

Ofgem's Chief Executive, Alistair Buchanan, said: "Our evidence shows that Britain has a window of opportunity to put in place far reaching reforms to meet the potential security of supply challenges we may face beyond the middle of this decade. We do not advocate change lightly, but all the facts point to the need for reforms now to provide resilient supply security. Acting earlier will also help keep costs as low as possible for consumers and business."


Reform is needed because a combination of factors have come together including: the global financial crisis, significant world-wide demand for investment in energy, tough EU emissions targets, the closure of ageing power stations and an increasing dependency on gas imports. The outcome of Copenhagen, in terms of lower carbon prices, reinforces the climate of significant uncertainty just when an unprecedented level of investment is required.

Energy and Climate Change Secretary Ed Miliband said: "The Government is confident that Britain will meet its security of supply needs in the years ahead. Our Low Carbon Transition Plan has put in place a programme of action to deliver secure and increasingly low carbon energy supplies in the medium term through to 2020.

"However, for the longer term, Britain will need a more interventionist energy policy. The scale and upfront nature of the low carbon investment needed is likely to require significant reform of our market arrangements to deliver security of supply in the most affordable way.

"That is why my Department began work last summer to plot out the pathways to a decarbonised, secure energy mix in 2050 and the options for reforming the market to deliver it. Ofgem’s report will contribute to the proposals we will make at the time of the Budget."

(CD)