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

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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”

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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

    Comment number 264.

    Ok here’s an idea.

    The left over waste from nuclear power could be packed into a space ship and coordinates set for the biggest nuclear reactor in the solar system...

    The Sun.

    Job done.

  • rate this

    Comment number 263.

    @244 'bangers64'
    You mention the River Severn barrage - much hoped for. You need to talk to Peter Hain, who has recently resigned his post as MP to spend his time to work on that.

  • rate this

    Comment number 262.


    It's because we're being ripped off in this country and the developing countries pay their workers peanuts. In addition, by subsidising these nations in the first place, when they become developed economies, they will be indebted to the British Govt. Clever eh? That's how they pay the market prices.

  • rate this

    Comment number 261.

    Funny, isn’t it? Burying nuclear waste is seen as an immoral, dangerous and idiotic thing to do that will affect us for thousands of years to come. Yet burying CO2 is seen as a brilliant solution to the climate change problem and is the environmentalist's dream…

  • rate this

    Comment number 260.

    3 Minutes ago
    “Of course if carbon capture could be finalised, we wouldn't be having this debate”

    If we can’t store a few hundred tonnes of solid nuclear waste, most of which decays over a few decades, how are we going to bottle up millions of tonnes of gas literally forever?

    Oil/gas fileds have natural leaks. So carbon capture just creates carbon time bomb for future generations.

  • rate this

    Comment number 259.

    re 237 _ Jason , I am very much in favour of the Severn Barrage and other similar projects around the country . Not for a moment suggesting anything but anywhere I can check out the cost/% data ?

  • rate this

    Comment number 258.

    Can you believe the country is wasting money on this nonsense? We can't keep the streets clean, we can't protect the green belt, we can't stop the population spiraling out of control but if we all pay more taxes we can change the weather, right?

  • rate this

    Comment number 257.

    "a crisis in the Solar PV Installation industry by cutting tarriffs "
    Funnily enough, after the FIT was cut the price of pv panels dropped considerably. The high FIT just meant extra profits for suppliers of pv.

  • rate this

    Comment number 256.

    open the pits and finish using the coal, the planets got 3 billion years yet to sort the mess out long after the last human drawers breath

  • rate this

    Comment number 255.

    I wouldn't really mind paying an extra few pounds per year if i thought the money was going to be invested wisely and used in the best possible way... I just know it won't be and at some stage along the way, someone will be getting jolly rich

  • rate this

    Comment number 254.

    Clearly the government is rigging the market in order to greenwash nuclear power, again. The problem of nuclear waste disposal has not been solved and it's link with nuclear weapons is rarely debated (except regards Iran). We all want sustainable energy supplies but that does not mean we have to create more waste and reduce security. Let's promote alternative energy and energy efficiency.

  • rate this

    Comment number 253.

    Take back our power network and present power stations (no money for companies or share holders) Stop spending money on ridicules schemes to re structure this and that. Stop going to war in far away place that have no real benefits for the UK, stop paying billions to the EU. Start investing in a real future, not 10 years but 100 years. Start building a Britain that is the envy of the world!

  • rate this

    Comment number 252.

    What I don't get is that if demand from "developing countries" like India and China is driving up prices, how do those countries afford to pay the "market rate" in the first place? Do they really pay the same as the UK where people are struggling to heat their homes each winter? Or is it simply that we're being ripped off in the UK?

  • rate this

    Comment number 251.

    If the utilties were not private shareholder-driven enterprises, the government (whichever party) would be fully accountable for it's lack of investment in renewables. Instead, it's accountability by proxy (Which means that blame can be placed elsewhere).

  • rate this

    Comment number 250.

    The Government that has caused a crisis in the Solar PV Installation industry by cutting tarriffs announces that in order to invest in non carbon technologies we the consumer must pay higher energy prices.
    Industry and shareholders get massive profits while ordinary consumers suffer.
    Gimme, Gimme, Gimme Government by grabbing Tories and their sponsors.

  • rate this

    Comment number 249.

    All that methane bubbling into the atmosphere from areas of melting ice - exploit that instead of fracking in the UK and poisioning precious ground water supplies and depositing return waste of chemicals to be potentially dumped off the coast.

    I live hundreds of miles from Blackpool, so no axe to grind - but know a cynical exploitation from an American subsidary of Halliburton when I see one.

  • rate this

    Comment number 248.

    A couple of years ago, I attended a seminar on controlling nuclear power stations. The experts were French and former Eastern Bloc. It was clear then that they would be replacing our power stations.
    A fortnight ago, I attended a seminar on UK power distribution. The UK has no turbine or cable manufacturer!
    Another UK windfall (no pun intended) for Johnny Foreigner I’m afraid.

  • rate this

    Comment number 247.

    For the full story go to the sci/tech section of the BBC website and read the article titled Energy Bill Avoids Carbon Pledge. Far more important story as the above only tells you the good bit. Amazed that the BBC have this one on the main news page and the important part buried away.
    DECC have failed miserably with this bill.

  • rate this

    Comment number 246.

    Energy can't be created or destroyed: has anyone asked the question what happens when we start removing energy from the "green" options? What environmental impact will reduced wave energy have on shore marine life for example? There is always a cost to be paid, just something for folk to think on (we know the costs for fossil & nuclear).

  • rate this

    Comment number 245.

    I genuinely am beginning to believe that governments and environmentalists are against nuclear power solely because it would solve climate change. How could they justify extortionate fuel taxes if all the rest of our power was generated cleanly? How could they justify these rotating follies that are sprouting up everywhere? How could they justify the attention they get from scare mongering?


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