Science & Environment

UK power sector 'needs overhaul'

Electricity pylons
Image caption The new report suggests a hybrid system to deliver new power supplies

The UK needs to revolutionise the power industry to meet its climate change laws, according to a report by the government's climate advisers.

The Climate Change Committee says the current free-market system to deliver new power supplies is not working now, and will not work in the future.

It suggests a new hybrid system where government dictates the amount of clean power that's needed.

It then gets private firms to bid to provide it.

The government has responded positively to the report, and will publish its own ideas on energy reform next week.

The committee made its recommendation as part of its latest suggested carbon "budget"

The government's Climate Change Act prescribes emissions cuts of 80% by 2050 (against a 1990 baseline).

The committee says that to keep on track, emissions by 2030 must be cut 60% relative to 1990 levels - that is 46% against current levels.

The Committee estimates this can be achieved at a cost of less than 1% of GDP in total - a fraction of one year's growth over the next two decades.

It says the key to rapid de-carbonisation of the economy is building clean power stations to replace the generation of old coal and nuclear plants due to close.

Lights on

This is where the market reform comes in. Britain's power supplies used to be controlled by old-style central planning from the Central Electricity Generating Board. The main aim was to keep the lights on.

In the 1990s, the wave of privatisation allowed firms to choose what power stations they'd build in the (correct) expectation that competition would drive down prices.

But with so many old power stations closing, there are fears now about keeping the lights on, as well as failing on carbon targets.

The committee chair, Lord Adair Turner said: "We urge the Government to develop the policies required to cut emissions over the next two decades.

"We are recommending a stretching but realistic fourth carbon budget. Any less ambition would not be compatible with the 2050 target in the Climate Change Act.

"The case for action on climate change is as strong as ever: climate science remains robust and suggests that there are very significant risks if we do not cut emissions. And countries acting now will gain economic benefits in an increasingly carbon constrained world."

The committee wants the new carbon budgets enshrined in law under the Climate Change Act by summer 2011.

Friends of the Earth's Simon Bullock urged the government to back the committee's ideas on market reform. "It is clear that there can be no future for gas or coal generation unless all their emissions are captured," he said.

But he complained that the committee's targets were too weak. "The proposed new targets are based on a 50:50 chance of exceeding a two degree rise in global temperature - a massive gamble with the fate of hundreds of millions of people," he said.

But the government will also face countervailing pressure from people who object to fuel bills going up to pay for increased "green" energy - especially when the UK is in the middle of a remarkable cold snap.

The government estimate that "green" energy policies will push up bills by 26% for medium-sized industries by 2020.

DECC says it expects the impact on domestic prices will be mitigated by government incentives on energy efficiency which will keep prices rises to homes down to just 1%. But some commentators have expressed scepticism about this figure.