there is an expectation that particular arrangements will persist, or at least change predictably.
If policy is seen as credible, this will minimise
the perceived risk of investment. Credibility is a
quality of the policy environment, which
depends on institutional capacity, political predictability, public support and the coordination of
objectives across power market services.
Governments can also take additional measures
to increase credibility and reduce investment
risk, such as passing primary legislation (as the
UK did with the 2008 Climate Change Act),
writing legal contracts, providing guarantees and
releasing information on the performance of
first-of-a-kind investments.
The pressure on policymakers to ensure that
power markets function efficiently in delivering
affordable, reliable and low-carbon electricity is
only going to increase with higher levels of
renewables penetration and greater reliance on
Fig. 18 Progress towards carbon pricing and market competition between fuel sources. Source Vivid Economics
Fig. 19 Progress towards efficient management of the power grid. Source Vivid Economics
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