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

Related Stories

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.


More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites


This entry is now closed for comments

Jump to comments pagination
  • rate this

    Comment number 184.

    48.Auther Smith
    2 Hours ago
    “Why isnt it law that all new homes have solar panels fitted ?”

    Because the current generation of panels, like most alternative technology, are a tax payer funded scam. They have a limited life and are unlikely to ever repay the energy that goes into their production.

    Still gives the buyer a warm fuzzy feeling and keeps civil servants on the gravy train.

  • rate this

    Comment number 183.

    why dont we just buy the Russians new innovation, multiple nuclear reactors built into old tanker ships.

    Cheaper to buy as they are already built and they can be sailed easily all the way to Britain.

  • rate this

    Comment number 182.

    First we have wind farms - sorry your energy bills will go up to subsidise this. Now we have nucular - sorry your energy bills will go up to subsidise. Its the same old story, whatever the problem our costs will go up.

    What about the state getting a grip and doing stuff to get our bills DOWN.

  • rate this

    Comment number 181.

    Anonymous Please

    . "The true price of our current 'cheap' energy will be paid by our children and grandchildren."

    Is that the same children being ferried by car to school then spending their evenings in their centrally heated rooms on their computers or watching their TV while chatting on their mobile phones about where they are jetting off to on holiday?

  • rate this

    Comment number 180.

    Wonder if fusion could have been developed already if money spent on renewables and especially on "democracy export" in middle east were spent on fusion research instead?

    As a side effect, it would have nearly zeroed terrorists and dictators money supply!

  • rate this

    Comment number 179.

    Plenty of people are saying it is a good thing to pay a little more so that we can be greener. Yes right, try the real world, try being in a position like my daughter where during last winter she chose to keep the TV and lights off so that there was enough electricity to cook food for my grandkids. I cannot say on this site what I truly think of fools like you.

  • rate this

    Comment number 178.

    The last labour government under Blair, new the nuclear option was a necessity for the UK, but sat on its hands because of its own left-wing. We lost the the last UN manufacturer of Nuclear stations and now its a French business. If we don't make this call now, we will be sat in the dark by 2020.

  • rate this

    Comment number 177.

    We desperately need a government that will have a clear headed energy policy that isn't overly influence by environmental considerations

    Look were the last government got us. No new power stations, imminent power shortages & no domestic power industry. Now we have to rely on the French & Germans

    Cameron, how about investing in a UK based nuclear power industry ?

  • rate this

    Comment number 176.

    So, these wonderful private companies have failed to invest in their infrastructure because they deemed paying sharehalders and bosses vast dividends, wages and bonuses; and who picks up the tab?

    Private profits, public losses. The economics of the mad house.

    Re-nationalise energy, water, rail. Use the profits to invest in the infra-structure, and in the process get this country moving again

  • rate this

    Comment number 175.

    I fail to understand why we have not exploited tidal power- we have plenty of major sites -Clyde,Mersey,Avon,Humber,Thames,Tees-expense has been quoted but our own (Mersey) needs a 2nd River Crossing - a bit of imaginative thinking would combine the two and provide enough power for most of the region

  • rate this

    Comment number 174.

    The estimates for future energy requirements are based upon economic principles of perpetual growth leading to increased demand. That cycle has ended and apart from a few global aberrations Western demand will shrink as resources are depleted and costs soar ever higher driven by increased population and Eastern development. Plan for a balanced economy else perfect fusion if you want growth.

  • rate this

    Comment number 173.

    GrumpyMungo #139:

    The whole energy discussion seems to be driven by eco-climate drivel. The planet is not warming up.... Nuclear is expensive and potentially dangerous. . Fossil fuels are more efficient, safer."

    Never mind the ostrich mentality, your last point is bunk. To date, there have been many times the number of deaths per unit energy delivered from fossil fuels than from nuclear.

  • rate this

    Comment number 172.

    With the threat of the lights going out, Ronnie Corbett may be forced to buy four candles...

  • rate this

    Comment number 171.

    So here we go again. We have to pay yet higher bills so that overpaid energy company execs can keep drawing their multi-million pound salaries.I simply can't afford my energy bill now. In winter I live in one room and have to wrap blankets around me as I can't afford to heat my house all the time. Renewable energy and nuclear will be the death of me if they keep on subsidising rich executives,

  • rate this

    Comment number 170.

    "What nobody says is that once the nuclear rods are spent, they are still around for 500,000 years"

    Nobody said it because it isn't true - spent rods can now be reprocessed in order to produce more fuel and less-harmful by products,

    With solar, we'd need to instal 250 square meters every second from now until 2020 to meet our energy needs - clearly impractical.

  • rate this

    Comment number 169.

    "could result in higher consumer bills, critics have said."

    Could? Is there a doubt?

  • rate this

    Comment number 168.

    157. bigoll
    In answer to your question:
    Nuclear fission to begin with, will give us about 100 years if we build it well and get the safety right. In that time Nuclear fusion will be well in its stride an energy prices will drop as the technology becomes more and more usable..Simple.! Your wind mills and dream catchers just aren't up to the task. You know it, I know it and science knows it..!

  • rate this

    Comment number 167.

    I'm surprised that most posters here only think of renewables as wind turbines which aren't as efficient as solar. What nobody says is that once the nuclear rods are spent, they are still around for 500,000 years. Stupid. Solar do not pollute anywhere near as much and lasts for many years. Technology needs to evolve. More subsidy to renewables none for private companies.

  • rate this

    Comment number 166.

    The sooner the better - stop procrastinating and get on with it.

  • rate this

    Comment number 165.

    There is a sense of deja vu about so called green measures and rising energy prices for the consumers. This is exactly what we had with the labour government, green initiatives that meant higher prices for travel, for energy, you name it. Please can we have some clear, well thought out approaches to clean energy that will work and does not constantly penalise the people of this Country


Page 6 of 15


More Business stories



BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.