Energy Bill may be amended to include efficiency FIT

30th November 2012


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DECC is consulting on paying consumers for saving electricity after Ed Davey confirmed that amendments could be made to the Energy Bill to promote efficiency

In presenting the long-awaited Bill, the energy and climate change secretary pledged that proposals to promote reductions in electricity demand and to allow the government to set decarbonisation targets for the sector in future will be added to the bill during its passage through parliament.

As it stands, the it includes no reference to such measures, however. Instead the energy department has launched a consultation on potential financial incentives that could be used to reduce electricity demand, including a feed-in tariff and payments for investing in more efficient products – the results of which will inform potential amendments to the Bill.

The final Energy Bill, much of which will apply in Scotland as well as England and Wales, sets out the legislative measures needed to reform the electricity market, creating a system of supply contracts with the aim of providing investors with the long-term certainty of energy prices needed to encourage investment in building large-scale renewable energy facilities, nuclear power plants and carbon capture and storage (CCS) operations.

Davey claimed the measures would “kick-start a renaissance in construction of low-carbon energy infrastructure and in low-carbon manufacturing supply-chains”.

The Bill includes an emissions performance standard for all fossil fuel plants of 450g of CO2 per kilowatt hour, and outlines measures to create a new regulator for the nuclear energy sector.

While the Bill does not currently include any reference to energy efficiency, the design of the capacity market mechanism will aim to reduce electricity demand.

“The Bill will support the construction of a diverse mix of renewables, new nuclear, gas and CCS, protecting our economy from energy shortfalls and significantly decarbonising our electricity supply by the 2030s,” said Davey in presenting the Bill to MPs.

“In an era of rising global energy prices by shifting to more home grown sources of power and by becoming more energy efficient, we can cushion our economy from the fluctuations of world gas markets.”

The government has also reaffirmed its commitment to shield some of the UK’s energy intensive industries (EIIs) from increases in energy prices caused by the reforms, stating that it will consult on its plans in the spring.

While the Bill has been broadly welcomed as delivering on its aims to provide a boost to the low-carbon energy sector, the Renewable Energy Association (REA) has warned that it has not paid enough attention to the potential benefits of onsite renewables for industry, and which could help EIIs weather future price rises.

“The most cost-effective ways for energy-intensive industries to manage their energy costs are demand reduction and onsite generation, such as solar power and biomass- or waste-powered combine heat and power systems,” said Mike Landy the REA’s head of onsite renewables.

“Heavy industry remains a largely untapped opportunity for renewable energy deployment, and it is vital it is supported in the policy framework.”

Others remain critical of the government’s decision to postpone setting decarbonisation targets for the energy sector until 2016.

“Although the majority of measures are positive, and should enable us to meet our 2020 EU renewables obligation, the lack of an emissions target for 2030 leads to longer term uncertainty on clean energy investments,” commented Alistair Smith, from the Institution of Mechanical Engineers.

“In the absence of this clear target we will likely see a dash for (unabated) gas and it effectively removes any legislative incentive to develop CCS technology for gas-fired powered stations in the medium-term.”

The government expects the Bill to achieve assent during 2013, with its reforms to the electricity market to start coming into effect during 2014.

DECC’s consultation on incentivising energy efficiency runs until 31 January 2013.

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