'Flawed' Energy Bill must be revised, warn MPs

27th July 2012

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The government must amend the draft Energy Bill to promote energy efficiency and support for renewables or risk "botching" its plans for clean energy, say MPs

In its report on the draft Energy Bill, the parliamentary committee on energy and climate change strongly criticises the coalition’s failure to include any meaningful reference to improving energy efficiency, labeling the Bill as “fundamentally flawed by the lack of consideration given to demand-side measures”.

“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 nuclear, wind, wave and carbon capture and storage,” warned Tim Yeo, chair of the committee.

In the report, DECC also comes under fire for failing to complete a study on the potential benefits of electricity efficiency in time to contribute to the draft Bill. The committee describes the department’s efforts as “completely unsatisfactory” and says they risk undermining the effectiveness of energy efficiency policy by leaving it to “last-minute measures”.

The committee argues that despite launching the energy efficiency deployment office this year, 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 carbon reduction targets.

According to a draft DECC report seen by the committee, electricity efficiency in the UK could cut the country’s total consumption by 155 terrawatts by 2030 – equivalent to 40% of demand – however, the committee warns that existing policies will only achieve around one-third of these savings.

The committee recommends the Bill is amended to refer explicitly to permanently reducing energy demand and to provide the energy secretary with powers to create a feed-in tariff scheme rewarding energy firms for cutting demand.

“Energy efficiency could be one of the cheapest ways of cutting carbon and improving energy security and we urge the government to consider incentives for power companies to reduce demand,” said Yeo.

The committee’s report also disparages the proposed Bill’s ability to encourage investment in renewable energy. It argues that its plans for “contracts for difference” (CfD), which guarantee the price of energy for generators over a set period, are so complex and hampered by spending restrictions imposed by Treasury, as to be “unworkable”.

Yeo and his colleagues conclude that secondary legislation should be created clarifying the CfD system and, after receiving reassurances from Ed Davey that the government would breach Treasury’s spending cap rather than risk missing carbon budgets, the committee recommends the Bill is amended consistently to include reference to achieving the targets.

The committee also calls on Treasury to explain how it will amend the budgets rules to ensure the UK’s legally-binding carbon targets aren’t compromised.

Other recommendations in the report include a target to decarbonise the electricity sector by 2030; government transparency on its support for nuclear power; and a subsidy scheme for innovative demand-side technologies, similar to the Renewables Obligation.

Yeo concluded: “The government has a lot of work to do over the summer to make sure that the Bill is fit for purpose in the autumn and is not subject to any further delays.”


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