A new Energy Bill, two years in the making, will triple investment in renewable energy and mean the end for coal-powered generation.
The Bill commits the government to supporting low carbon electricity to the tune of £7.6bn by 2020, over three times the current level of £2.3bn for 2012-13.
The Carbon Capture and Storage Association, the Nuclear Industry Association and RenewableUK welcomed the introduction of the Bill, saying it “would help to unlock billions in investment in low carbon generation, enable the UK to meet its energy security and climate change targets, and create thousands of jobs”
Solar Trade Association’s PV specialist, Ray Noble, said the Bill means that “solar power will be massive” and called for a dedicated strategy for PV, “like gas”.
Announcing the Bill in Parliament, energy and climate change secretary, Ed Davey, said: “The Bill will support the construction of a diverse mix of renewables, new nuclear, gas and CCS, protecting our economy from energy shortfalls. It will stimulate supply chains and support jobs in every part of the country, capitalising on our engineering prowess and our natural resources, cementing the UK’s place at the forefront of clean energy development.”
The push for low carbon electricity will add £95 a year to the average household bill by 2020, an increase of 7%.
Much of the support will be delivered through long-term contracts for difference (CfD), designed to guarantee stable revenues for investors in low-carbon energy. They will provide cash for generators of nuclear power and renewables if the market price of electricity drops below a specified strike price. A new government owned company will act as a single counterparty to the CfDs.
A ‘capacity market’ will encourage investors to build gas-fired power plants to provide back-up for when wind farms are not generating. The System Operator (National Grid) will decide the level of generation capacity it judges is appropriate and then contract for it through an auction four years in advance.
An Emissions Performance Standard (EPS) set at a maximum of 450g CO2/kilowatt hour (kWh) will curb the most polluting coal-powered stations; any new coal-fired power station would have to be fitted with carbon emission capturing technology. “This law will mark the end of any plans for new, highly polluting coal-fired power stations in this country,” commented Greenpeace political director Joss Garman.
Gas-fired power plants would remain unabated at this level, however, prompting Green Party MP Caroline Lucas to call for amendments to the Bill to rule out a new “dash for gas”.
The Bill pushes the date for setting a 2030 decarbonisation range for the power sector, to 2016, once the Climate Change Committee has provided advice on the fifth Carbon Budget, which covers the period 2028 – 2033.
This has prompted calls, led by Conservative chairman of the Energy and Climate Change Committee, Tim Yeo, for amendments to the Bill that would introduce a decarbonisation target for 2030 straight away, a move supported by Alistair Smith, Chair of the Institution of Mechanical Engineers’ Power Division. He said: “The lack of an emissions target for 2030 leads to longer term uncertainty on clean energy investments.”
The central modeling for the Bill assumes a scenario where the carbon intensity of electricity generation is 100g/kWh by 2030. Two further scenarios modelled for comparison are either side of this figure: 200 and 50g/kWh. The latter is the level recommended by the Committee on Climate Change.
Wind farm builder Alstom UK, one of seven companies who wrote to the government arguing that a decarbonisation target was vital to permit them to locate factories in the UK, issued a statement saying: “We will continue to invest, but the pace is likely to be slower without a decarbonisation target.”
Oversight of the nuclear industry will be enhanced through creating an independent statutory nuclear regulator, the Office for Nuclear Regulation.
Richard George, Greenpeace nuclear campaigner, said: “The coalition agreement pledged not to subsidise new nuclear reactors. Yet the energy bill offers massive public subsidies to anyone willing to build new nuclear reactors.”
During the passage of the Bill, proposals will be added to ensure energy companies help consumers to get on the best energy tariff, and to promote energy efficiency through electricity demand reduction.
Andrew Kuyk, director of sustainability for The Food and Drink Federation (FDF), welcomed the certainty, but wanted to see more detail. “We look forward to engaging in further discussions on how to enable ours and other UK industries to maximise… their energy efficiency in increasingly competitive world markets.”
The emphasis on energy efficiency was also welcomed by the UK Green Building Council, and Brian Smithers, director of Rexel UK, who, however, issued cautions: “Firstly, unless monitoring energy use becomes standard, it will be impossible for homeowners and businesses to understand where the biggest wins can be made.
“Secondly, the British public is relatively unaware of energy saving technologies. An energy efficiency information “hub” will be key to educating consumers and businesses alike about the benefits of measures including LED lighting, automation and efficient heating. However, we can’t just leave this to the energy suppliers.”
John Cridland, CBI director-general, said: “Energy-intensive manufacturing is finally getting its place in the sun today, by the exemption from necessary new energy costs. Equally important is the welcome boost the bill gives to investor certainty.”
Pöyry’s Richard Slark thought less certainty was given than is present in the Renewables Obligation, which will be phased out in 2018.
The Bill was welcomed by the electricity generation industry. Angela Knight, head of Energy UK, called it: “a big and positive step forward. This means that the huge investment will now start being made in our energy infrastructure and this will create jobs and help economic recovery.”
Ernst and Young’s Power & Utilities Partner, Tony Ward, cautioned: “It may not be until autumn 2013 before this Bill reaches the statute book, so maintaining confidence in its safe passage will be vital.”