Energy Bill threatens low-carbon generation

15th August 2012


Related Topics

Related tags

  • Energy ,
  • Renewable ,
  • Management/saving

Author

IEMA

The government is in danger of botching its plans to boost clean energy because the Treasury is refusing to back new contracts to deliver investment in low carbon technologies, according to Tim Yeo MP

Yeo, the chair of the energy and climate change committee, made the claim when launching the committee's pre-legislative scrutiny report on the draft Energy Bill.

The committee is particularly critical of the Bill’s plans for a new system of long-term agreements – contracts for difference (CfDs) – to provide a degree of certainty for investors in nuclear, wind, wave and carbon capture and storage.

The MPs point out that DECC’s initial consultation had indicated the CfD would be guaranteed by the state, therefore lowering the cost of capital, but say the Treasury has intervened so that the Bill includes a new model for contracts, which will spread the liability across various energy companies instead.

The committee wants the government to underwrite the new contracts in order to keep the costs of energy investment down for consumers.

“Electricity market reform is essential, but the new contracts proposed by the government will not work for the benefit of consumers in their present form,” said Yeo.

The MPs also criticise the cap on green levies imposed by the Treasury, which the committee says will ration the number of contracts available and create uncertainty among investors looking to fund new wind, solar, wave or tidal power plants. This is already having an impact on investment decisions and could paradoxically push up energy costs for consumers, the committee warns.

There is concern among the MPs that the Bill fails to include any meaningful reference to improving energy efficiency, labelling it as “fundamentally flawed by the lack of consideration given to demand-side measures”.

The committee argues that DECC is not prioritising tackling energy demand in its policymaking, even though reducing consumption is acknowledged to be one of the most cost-effective ways of meeting the UK’s legally binding targets to reduce carbon emissions.

The committee wants the Energy Bill to include a target to largely decarbonise the electricity sector by 2030.

“If the Bill does not set a target, then the UK may miss one of the biggest opportunities it has to create a low-carbon economy in the most cost-effective way,” concluded Yeo.

Energy companies largely welcomed the committee’s report. SSE said it shared the MPs’ concerns that the current model for CfDs could make them unworkable. It wants the proposed multi-party payment model scrapped and replaced by a counter-party model that is underwritten by the government.

Meanwhile, the business department (BIS) has revealed that policies designed to support renewable energy and cut carbon emissions, including the proposed carbon floor price, will push UK electricity prices higher than in competitor countries.

It says the cost of electricity in the UK will rise by £28.30 per MWh in 2020 due to climate change policies, whereas Germany and France are likely to increase electricity prices only by £17.30/MWh and £15.20/MWh respectively.

Subscribe

Subscribe to IEMA's newsletters to receive timely articles, expert opinions, event announcements, and much more, directly in your inbox.


Transform articles

Fifth of UK food firms unprepared for deforestation regulation

One in five UK food businesses are not prepared for EU Deforestation Regulation (EUDR) coming into force in December, a new survey has uncovered.

16th May 2024

Read more

Regulatory gaps between the EU and UK are beginning to appear, warns Neil Howe in this edition’s environmental legislation round-up

4th April 2024

Read more

Dr Julie Riggs issues a call to arms to tackle a modern-day human tragedy

15th March 2024

Read more

The UK’s new biodiversity net gain (BNG) requirements could create 15,000 hectares of woodlands, heath, grasslands, and wetlands and absorb 650,000 tonnes of carbon each year.

13th March 2024

Read more

Campaign group Wild Justice has accused the UK government of trying to relax pollution rules for housebuilders “through the backdoor”.

14th February 2024

Read more

Digital tracking, packaging data delays and new collections provide a waste focus for this edition’s environmental round-up by legislation expert Neil Howe

28th November 2023

Read more

Environmental crimes could result in prison sentences of up to 10 years and company fines of 5% of turnover under a proposed EU law agreed by the European parliament and council.

21st November 2023

Read more

Media enquires

Looking for an expert to speak at an event or comment on an item in the news?

Find an expert

IEMA Cookie Notice

Clicking the ‘Accept all’ button means you are accepting analytics and third-party cookies. Our website uses necessary cookies which are required in order to make our website work. In addition to these, we use analytics and third-party cookies to optimise site functionality and give you the best possible experience. To control which cookies are set, click ‘Settings’. To learn more about cookies, how we use them on our website and how to change your cookie settings please view our cookie policy.

Manage cookie settings

Our use of cookies

You can learn more detailed information in our cookie policy.

Some cookies are essential, but non-essential cookies help us to improve the experience on our site by providing insights into how the site is being used. To maintain privacy management, this relies on cookie identifiers. Resetting or deleting your browser cookies will reset these preferences.

Essential cookies

These are cookies that are required for the operation of our website. They include, for example, cookies that enable you to log into secure areas of our website.

Analytics cookies

These cookies allow us to recognise and count the number of visitors to our website and to see how visitors move around our website when they are using it. This helps us to improve the way our website works.

Advertising cookies

These cookies allow us to tailor advertising to you based on your interests. If you do not accept these cookies, you will still see adverts, but these will be more generic.

Save and close