Energy bill to boost cleaner energy production

 
Wind farm off the coast of Kent The government wants energy companies to feel confident investing in renewables

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The government's draft energy bill, designed to encourage major investment in cleaner energy generation, could result in higher consumer bills, critics have said.

The bill outlines long-term contracts to encourage investment in nuclear and renewable energy.

But Energy Secretary Ed Davey told the BBC these did not amount to public subsidies for new nuclear plants.

He said bills would be even higher if the new measures were not introduced.

The government needs to increase energy capacity to compensate for the closure of a number of coal and nuclear plants, and to reduce the UK's reliance on imported gas.

"We need to make sure the bias towards gas is dealt with... and that low carbon sources can compete on a level playing field," Mr Davey said.

"With nuclear capacity and coal capacity coming offline, we need a market structure to keep the lights on. To get investment, we need to give investors certainty that will lower the cost of capital.

"There will be no blank cheque for nuclear - unless they are price competitive, nuclear projects will not go ahead."

The government said about a fifth of existing capacity was expected to close over the next 10 years, while demand for electricity was forecast to double by 2050.

State subsidies for nuclear plants are illegal in the European Union, and guaranteed contracts for energy suppliers are seen by some as a way around these laws.

Fine line

Start Quote

The contracts for nuclear appear to be a de facto subsidy, although it is not permitted for governments to subsidise nuclear power either under European law or the conditions of the UK coalition government agreement”

End Quote

Mr Davey conceded that energy bills could increase as a result of these contracts, but said bills would rise even more without them due to the rising cost of imported wholesale gas. Producing our own energy, Mr Davey said, would help to keep prices down.

Npower chief executive Volker Beckers told the BBC the impact on domestic fuel bills was unclear.

"It's too early to say the impact will be X% on bills," he said.

He said long-term contracts would prove beneficial for the energy sector, while the other major components of the bill would be counterproductive.

"In particular, we believe the introduction of a capacity mechanism will make the British energy sector highly inefficient, costing consumers many billions in unnecessary cost".

Through this mechanism outlined in the bill, payments will be made to power stations to ensure there is sufficient and reliable capacity to meet demand.

Consumer Focus said the government had to "walk a fine line" between securing the UK's energy supply and meeting carbon reduction targets, and keeping the cost to consumers down.

"The government must guarantee that any subsidies for new power generation and any rate of return to suppliers are fair, and not overly generous at consumers' expense," said the group's director of energy Audrey Gallacher.

Environmental groups say the bill will not reduce the UK's reliance on gas.

They say that more clarity is needed over the government's long-term policy, particularly how it will achieve stringent C02 reduction targets.

Dirty plants

The long-term contracts, precise details of which are not included in the bill, aim to reassure prospective investors in nuclear and offshore wind farms, which need huge up-front expenditure.

But they have proved unpopular with some energy suppliers, which say basing them on the difference between the actual market price and a preset, guaranteed price, is overly complex.

Other industry bodies have also expressed concerns about the so-called contracts for difference.

"Investment decisions for both developers and manufacturers need to be made a long time in advance and it's key that they get reassurance and understanding of how the market will allow generators of all sizes to produce and sell power," said Renewable UK's director of policy Dr Gordon Edge.

The government will also introduce an Emissions Performance Standard, designed to prevent the construction of new, dirty coal plants.

Only coal plants with carbon capture and storage will, in effect, be allowed, although this technology is unproven on a large scale.

The bill will also create an independent, industry-financed regulator - the Office for Nuclear Regulation.

The government's nuclear policy has been undermined by the decision of German power giants E.On and RWE to pull out of building new plants in the UK. The government had planned to build eight new plants, but with French power group EDF the only major bidder left, it is very unlikely this many will be built.

Nuclear power had formed an important part of the government's plans to boost clean energy production to help hit its target of reducing carbon dioxide emissions by 80% by 2050.

Environmentalists believe the problems with increasing nuclear capacity will leave the UK reliant on dirty fossil fuels.

"It's obvious that plans for new nuclear power stations have crumbled," said John Sauven, executive director of Greenpeace UK.

"The government now has to drop its misguided affair with this hugely expensive pipe dream. Energy Secretary Ed Davey should ramp up the efficiency of our energy system and invest in home-grown renewable energy to boost the economy and reduce consumers' exposure to rocketing gas prices."

Higher bills

The Department of Energy and Climate Change (DECC) has said that £110bn of investment over the next decade is needed to boost electricity generation.

It also needs to introduce measures to help improve energy efficiency to reduce demand.

One set of measures designed to encourage energy saving by companies did not appear in the draft bill. Agreeing a baseline from which to make cuts proved too difficult, according to the BBC's environment analyst Roger Harrabin.

Although a number of energy suppliers have cut gas and electricity prices this year, they rose sharply last year and are expected to rise again this winter.

The draft energy bill will be scrutinised by parliament before appearing as a fully-fledged bill in the autumn.

 

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  • rate this
    -1

    Comment number 164.

    I am not suggesting that we pollute our environment but all this global warming rubbish is now getting beyond a joke. It is wrong that UK energy users have to subsidise so called renewables, etc., due to the lobbying of a Green Minority. We should accessing Shale Gas and our coal reserves as well. The UK has not got any warmer for the last 10 years and probably more. This spring has been very cold

  • rate this
    +2

    Comment number 163.

    @112

    Yes, but the money involved is nothing. We are also in the American scheme, but again the sums involved are laughable compared to what is really required. Real money will not be invested in fusion because there is little opportunity to make a fast buck. The fuel is cheap and plentiful, and there is no profit to made dealing with hazardous by-products, since there are none.

  • rate this
    +2

    Comment number 162.

    @139 GrumpyMungo

    Your lack of knowledge is staggering.
    "CO2 isn't dangerous, it's what plants need to live." Brilliant.
    I suggest you study some chemistry and see how it absorbs solar energy differently to oxygen and nitrogen.

  • rate this
    0

    Comment number 161.

    "Energy bill to boost clean energy production"

    Or in other words, "We're all going to have to pay more!"

  • rate this
    -1

    Comment number 160.

    A lot more could be done for the money, insulation and hydro power for a start. The flooding of a few grouse moors would benefit everybody.

  • rate this
    0

    Comment number 159.

    BBCshed #143:

    "I want to see the British government giving research money to British Engineers in British companies to develop energy systems and solutions for Britains... energy future."

    Great in principle. Trouble is, British Engineers end up being run by British Management, financed by British Financiers, and micromanaged by British Politicians. And thus it all falls apart.

  • rate this
    0

    Comment number 158.

    With over 300 years supply of UK coal in the ground, we should invest in 'clean coal' power stations and hydrogen.
    Wind & Wave power are completely uneconomic. Wind generators shut down to prevent oscillation damage in strong winds and do not provide base load output!
    Power from waste using biodigesters (pioneered in Germany) looks good. Solar doesn't make sense until cost halves.

  • rate this
    +1

    Comment number 157.

    A question for the anti-renewables/nuclear lobby:

    What would you replace fossil fuels with when they run out and/or become economically unviable in a couple of decades? Because that's precisely what will happen - it's not up for debate.

    Or are you waiting for that to happen first, before screaming about why energy costs too much and why no alternatives were put in place years before?

  • rate this
    +5

    Comment number 156.

    Assuming we don’t build nuclear power plants and we try to reduce our fossil fuel consumption then by 2050 we will be in very big trouble.

    Wind and wave along with solar will just not meet our needs, and be ridiculously expensive.

    Just what will the renewable supporters be saying when the lights go out?
    Then again nobody will have internet access to be able ask them.

  • rate this
    +3

    Comment number 155.

    England had the worlds first nuclear power station in 1956 yet in 2012 we are hostage to French and German companies to build new stations. What was all that about investing in infrastructure and high unemployment....surely there is a solution there somewhere....

  • rate this
    +3

    Comment number 154.

    If I , as an individual, am forced to provide investment money to my energy supplier , then they shoul d , as a profit making private company , be forced to issue me with a share certificate in recognition of my investment

  • rate this
    +6

    Comment number 153.

    Energy was privatised, they took over old power stations made massive profits and have failed to invest in not only our future but their own. Short term gain for the share holders. And now they want us the public to shell out more money so they can make a profit. Come on government, get a grip on these situations, before its just too late, and your pocket full of paper money isn't worth a damn!

  • rate this
    +3

    Comment number 152.

    The ideal is good, we all want a clean environment and to breathe clean air but the whole AGW, carbon footprint, pay more get less "environmental policy" is one huge scam.
    The UK's current carbon emissions make absolutely no difference whatsoever to Global warming.
    We don't mind the extra burdens of cost and recycling our waste so long as the environment benefits instead of the crony capitalists.

  • rate this
    +7

    Comment number 151.

    So they want to encourage use of green energy resources or just hand lucrative deals to their corporate buddies
    ----

    AND WE HAVE A WINNAH !

    CONGRATULATIONS !

    Subsidies for the serfs putting solar panel on their roofs are withdrawn..

    while the Coalition goes full steam ahead on the corporate cronyism and nepotism system our corrupt leaders excel at

  • rate this
    0

    Comment number 150.

    Why are we still debating a nuclear issue? The technology exists so that every building is able to generate solar power whether through solar panels or adhesive film to windows. The latter is pricey at present and would require some sort of subsidy to kickstart it, but the fact it is available should not preclude its use. Everytime renewables are mentioned scaremongering about cost abound.Untrue

  • rate this
    +4

    Comment number 149.

    The Government wants to put 800 turbines in Wales. On top of that, they need to build a new VAST mesh of pylons to transport the electricity. It would be more cost effective to place the turbines nearer to the existing grid. Somewhere like Chipping Norton, for example.
    Seriously, this would be a better economic solution as the wind is more steady there.

  • rate this
    -2

    Comment number 148.

    These islands sit on vast reserves of coal if we want to reduce our dependence on foreign supplies but dont want to pay huge surcharges for nuclear and unreliable wind power then build new coal stations with carbon capture. How many thousands of U.K. jobs will this create? Deficit reduction(less benefits) and cheap energy for domestic and business.

  • rate this
    0

    Comment number 147.

    People forget
    1) that Nuclear fuel isn't "secure" - there are no uranium mines in the UK.
    2) there's a huge cost in shutting them down once they get old. Just put them into a separate company when the time comes and declare it bankrupt - the UK taxpayer then has to shut them down safely
    3) the difficulty of waste disposal (maybe we could pay the Greeks to take it?)

  • rate this
    +2

    Comment number 146.

    If we give the energy companies money to help them invest in new plant, do we get paid interest?

    No, I thought not!

    It would be far more efficient if the government were to fix the charges so that we don't all have to fight for best prices, and then lent the energy companies the money they need, at commercial interest rates.

    Ok, they'd scream, but I bet none would give up their gravy train!

  • rate this
    0

    Comment number 145.

    Why?

    From the same team that brought you… here... banking meltdown

    "Need nuclear defence, in case targeted..."
    "Might as well have nuclear stations"?

    Making vulnerable to non-nuclear attack... warheads' waiting,
    or accident
    or error
    or waste-bombs, beyond maintenance-care

    "No subsidy" but "guaranteed profit"

    Orwellian

 

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