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UTILITY WEEK | 11Th - 17Th JULY 2014 | 3 Leader Ellen Bennett This week 4 | Seven days 6 | Opinion David Smith, ENA 8 | Interviews Getting ready for the Utility Week Achievement Awards 2014 11 Policy & Regulation 11 | News Level playing field for water is key 13 | Analysis Green subsidies cleared 14 | Analysis Solar burnt by its own success 15 | Analysis EU moots rethink on water 16 | Market view Getting CCS back on track 19 Finance & Investment 19 | News Good Energy: 70% of our new solar is at risk 20 | Analysis Thames digs deep for tunnel 22 Operations & Assets 22 | High viz Scottish Water 24 | Market view Wessex Water's supergrid 25 | Expert view Barclays Pingit 26 Customers 26 | News British Gas £1m mis-selling penalty 27 | Market view Service vs experience 28 Markets & Trading 28 | News UK July imports of LNG to almost double 30 Community 30 | Subscriber focus Steve Fleming, Mitsubishi Electric 31 | Disconnector The capacity market compromise is falling apart "It strikes me as rather like announcing that you are going to concrete over the Somerset Levels to a height of six feet and then proclaim that 'a flood prevention strategy is now fully in place'. It really is such a silly long-term policy that I cannot believe it will last for the time it will take to procure all this capacity." So says Alan Whitehead MP, on Decc's announcement last week that the first capacity auction, to be held in December, will procure 53.3GW of capacity, or more than 80 per cent of the UK's peak demand. This is a huge amount of power, and the cost to the consumer and distortion of the wholesale market will reflect that. National Grid arrived at this number for a variety of reasons. The system operator is by definition cautious. As Decc's own panel of technical experts points out in the report also published last week, it is working on assumptions that are risk averse in the extreme: for example, failing to factor in power coming from interconnectors in times of system stress. There is a fundamental contradiction in the design of the capa- city market, and the broader Electricity Market Reform (EMR) of which it forms a key part, that is now coming to the fore. EMR is an uneasy compromise between a competitive wholesale market and a government-controlled central energy buyer. It's a cut-and-shut, and the more speed it gathers, the shakier it looks. Decc is already using contracts for difference (CfDs) to decide the energy mix, favouring one technology over another. Now it is effec- tively taking over 80 per cent of the energy market. Where does that leave the wholesale market? And perhaps more importantly in the current political climate, where does that leave the bill payer? Decc has already had to "clarify" its radically downgraded forecast that the capacity market will add £2 to the average consumer bill. In fact, it has admitted, the average household will pay £13 a year towards keeping power stations open. That is not going to play well with the media or voters. Fundamental reform of the energy retail market is practically cer- tain, when the 2015 election is safely out of the way and the Compe- tition and Markets Authority reports back. It looks increasingly likely that wholesale market reform will accompany it. The government of the day will have to choose: central control or a competitive market? Ellen Bennett, Editor ellen.bennett@fav-house.com GAS 26 | News British Gas pays out £1 million for mis-selling 28 | News UK July imports of LNG to almost double WATER 7 | Expert view Karma Ockenden 11 | News Level playing field is key, says Open Water 15 | Analysis EU moots rethink on water 20 | Analysis Thames digs deep for tunnel 22 | High viz Scottish Water 24 | Market view Wessex Water's supergrid ELECTRICITY 13 | Analysis Green subsidies cleared 14 | Analysis Solar burnt by its own success 16 | Market view Getting CCS back on track 19 | News Good Energy: 70% of our new solar is at risk ENERGY 6 | Chief executive view David Smith, ENA 19 | Stock watch Intelligent Energy holdings 21 | Analyst view Martin Brough 23 | Pipe up Leo Carswell 27 | Market view Service vs experience Knowledge worth keeping Visit the Downloads section of Utility Week's website for special reports and exclusive research commissioned for the utilities industry. http://www.utilityweek.co.uk/downloads Smartest Energy: Energy Entrepreneurs Report http://bit.ly/1kzddrn