The report stated that increasing the choice to consumers in the energy retail sector is “only part of the solution” in relation to reducing energy bills.
A “continued effort to guarantee competition” had been noted by ACE, but it called for increased wholesale competition to help reduce price volatility and risks to investors, both of which would help stabilise and reduce energy bills.
Dr Nelson Ogunshakin, chief executive of ACE, said: “The UK continues to face significant challenges within its energy sector.
“Reducing uncertainty and risk will be essential if the UK is to encourage international investors into the market, while the cost to the consumer has risen up the political agenda in recent months.”
The ACE report also called for the introduction of a priority auction mechanism (PAM) and generation investment vehicles (GIVs) to achieve the “correct balance” between increasing competition and encouraging the £100 billion of investment required in the sector.
The PAM would see the government and energy suppliers purchase half of the capacity put forward in a first auction, for contracts longer than 24 months, and then 75 per cent of capacity put forward in a subsequent round, where contracts are longer than 12 months.
All the remaining capacity required would then be purchased over the counter.
The report said this would “have the dual impact of providing certainty of revenue for generators and encourage future investment whilst also encouraging a transparent and efficient pricing mechanism for the electricity market.”
ACE proposed five GIVs with a combined value of £8 billion to be created to “ensure that in the short to medium term project finance is secured”.
Ogunshakin added: “Government policy needs to be more proactive in guiding how competition, auctions, and trading within the sector will further develop over time.
“Such action would provide clearer price signals that ensure efficient investment, which provides a better deal for taxpayers and consumers.”