by David M. Newbery
- Meeting carbon targets requires decarbonising electricity. The least cost strategy involves nuclear power. In a liberalised electricity market, the price of electricity is set by fossil generation whose input costs are volatile but correlated with electricity prices. Nuclear power lacks that hedged and its finance is threatened by low and uncertain EUA prices. The increasing share of intermittent renewables exacerbates price risk. I propose changes to market design and the transmission access regime, while in the absence of an EU-wide reform to the ETS, a carbon tax seems the cheapest and fiscally most responsible way to deliver decarbonised electricity.
Newbery, D.M. (2010). "A Nuclear Future? UK Government Policy and the Role of the Market." EPRG Working Paper: EPRG1011, 2010.