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 284.

    Tidal turbines are a new technology, currently being developed and tested further, they can contribute significantly to the UK's energy mix but only at great cost, requring thousands of them to be installed. Again they are reliable except for a few hours when the tide changes direction, but this happens at different times in different places making the whole contribution a lot more balanced.

  • rate this

    Comment number 283.

    Mwbar1 = Tidal barrages are technologically mature - but are often refuted due to environmental concerns - loss off large areas of mudflats important for birds etc. However they are reliable and can produce fairly continuously, apart from a couple of hours at high/low tide. The Severn could produce 5% of the UK's energy in this way. Other sites are fairly limited though, in both power and number.

  • rate this

    Comment number 282.

    I would like to see fair green energy tariffs. The energy is generated from renewables but on that still winters night your power gets cut first.

    Should help with load balancing. Also it will be interesting to see how many greenies really want to be ‘closer to nature’ if, occasionally, it means missing the footie and going to bed early.

  • Comment number 281.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 280.

    There is talk of £ 48bn to solve the near future needs - the Big 6 alone could finance this,including interest,over 20 years using 50% of their profits,which would be subsidised by lower taxes for them too

  • rate this

    Comment number 279.

    It must be acknowledged by everyone living the UK, including politicians, that everything we depend on functions via electricity however green we are in other ways.

    From charging our 'phones to turning on taps to drink clean water. Or filling our car from pumps or running trains - a million things we rely on today only happens due to electricity supplies when you really think about it.

  • rate this

    Comment number 278.

    A fortnight ago I attended a seminar on UK power distribution. Several delegates stated that it was easier to do business in Germany as they had kept the equivalent of the CEGB; and the utilities were still held municipally held, so you were only dealing with one player.
    It’s a funny old game Saint.

  • rate this

    Comment number 277.

    There needs to be a price to pay for guaranteed profits, this should be a cap on maximum profits. The band does not need to be draconian, it can be quite large but it would prevent excessive profits being made from cash that should be going to further investment.

  • rate this

    Comment number 276.


    Just for once, can't we make the RIGHT DECISION and get Nuclear installed NOW rather than fudge it !

    That would be the absolutely WORST decision that could be made. Have you forgotten Japan and Chernoble? What is needed is a massive investment in the efficient use of energy.

  • rate this

    Comment number 275.

    213.bernard calland
    my thoughts exactly..... why should the public be forced to pay for any new ideas/inventions. If I was working on, or inventing something, or trying to make that something work more efficiently I would have to fund it myself and reap the benefits after. Therefore, surely the Shareholders should be financing till whatever system goes live. innnit?

  • rate this

    Comment number 274.

    Fossil fuels will run out and then what? What options do we have?

    Instead of everyone saying what they (in the delusion of the extent of their knowledge) believe will NOT work

    How about you suggest what WILL work?

    I'd really like to hear a better option than renewable + nuclear power for the near future, even if they have disadvantages.

  • rate this

    Comment number 273.

    Part of the energy of the gas from fracking could be used to separate the carbon from the hydrogen in the methane.

    This would leave solid carbon to be stored, easier than storing a gas, CO2, and the remaining hydrogen could then be used in total safety.

  • rate this

    Comment number 272.

    UN estimated death toll from long-term cancers due to Chernobyl: 4,000
    No. of annual premature deaths from poor air quality in London: 4,300

    So the worst nuclear accident in history has caused fewer deaths worldwide in 26 years, than is caused by air pollution (mostly from vehicles) annually in London alone. Keep believing nuclear power is dangerous, folks.

  • rate this

    Comment number 271.

    ' Start building a Britain that is the envy of the world!'

    Look around you Rob. What you have said would be funny it it wasn't so sad. Most of the people who live here just don't care.

  • rate this

    Comment number 270.

    Reviewing today's news ....Our excellent deficit reduction strategy means we can borrow cheaply. So, the government could borrow to fund nationalised nuclear power with capacity beyond our requirements. Then we could sell the excess to European neighbours and make a killing. It would be like finding North Sea oil all over again !

  • rate this

    Comment number 269.

    Wind farms add £120 to your bill and what do you get they only work at wind speeds of 8mph.+ and switch of at 27mph. and over a 12 month period they are only 30% efficient total waist of money.

    But it looks good in the government adverts.

  • rate this

    Comment number 268.

    blurightthru #223:

    "re 206 - some people cannot resist sniping,usually they are not in possession of actuality- try checking out your facts - indeed we did lose manuafacturing capacity in the 80's...-howver if you care to research it we lost far more manufacturing capacity under Blair/Brown than in the "dark" days of Thatcher."

    I did say "Thatcherite", not "Thatcher". Certainly applies to Blair.

  • rate this

    Comment number 267.

    The UK will have to build another Thames barrage within 20 years otherwise London will be regularly submerged. How about a bit of joined –up thinking and generate some electricity whilst they are doing it? Unfortunately, all barrage projects have a 30yr payback time and around 100yrs operating time. Hence they need for government foresight and intervention; very sadly lacking I’m afraid.

  • rate this

    Comment number 266.

    I despair at the governments blinded promotion of wind power. As others have said it is far from ideal. The Gov have crippled the solar industry but that is where all the research and effort should be being made. The sun has infinite power to give us, we just need to make the tech more efficient and affordable. SOLAR! SOLAR! SOLAR!

  • rate this

    Comment number 265.

    Are some people trying to say that nuclear power is 'clean' energy? Oh per-leese! The by-products of nuclear energy are anything but clean!
    The real problem is inefficient use of energy (wastage; insufficient insulation) and over-population. The last cause is something that all politicians conspire not to talk about. One day, neglecting that factor will be our Armageddon.


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