Removing carbon price support after 2025 would reduce net interconnector inflows by around 39%, with France and Benelux seeing the biggest decrease, according to a new report by Aurora Energy Research.
The report assessed the likely impact of removing carbon price support post-2025, by which time the government plans to have phased out all coal-fired generation in the UK. The carbon price support mechanism was designed to reduce emissions by encouraging coal-to-gas switching, so it is likely to be phased out once coal is off the table. Aurora said CPS causes economic distortions by creating an uneven playing field between British CCGT generation and imported European power.
In its report, Aurora predicts that the likely impact of removing CPS would be:
- Britain would generate an additional 21 TWh of electricity domestically from CCGT, with a corresponding decrease in continental generation from CCGT and coal.
- Net interconnector inflows would decrease by around 39%, with France and Benelux seeing the biggest decreases.
- An additional 1.4 GW of CCGT would be built in UK, in addition to increased generation from the existing fleet.
- Carbon emissions would rise in Britain, but decrease at the European level, given the net effect of switching from continental coal to GB gas generation.
- While carbon price support removal would result in lower carbon emissions in the medium term, this effect needs to be weighed against the potential detrimental impact on long-term investment in renewables and other low carbon generation.
Read the full report: What is the Carbon Price Support supporting?
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