New UK energy bill announced to mixed reaction

• 11 years ago (2012-12-01)
• Junior Isles

Europe 1061 Nuclear 640 Renewables 751

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There has been a mixed response to the UK government’s new Energy Bill, released this week. Some have criticised the bill as introducing additional uncertainty into an already fraught energy policy environment by proposing unconventional new measures to increase energy efficiency.

“Our concern about these new initiatives is that they introduce new risks,” said Richard Slark, director of management and engineering consultancy Pöyry.
The proposal “whips away some of the certainty about how much money will be available for low-carbon technologies”, he added.

Green groups have broadly welcomed the bill, but criticised the lack of a headline commitment by the government to cut power emissions by 2030.
UK ministers have claimed the new policy direction “…will bring about the biggest transformation of the UK’s electricity market since privatisation.”

The bill is crucial for realising the government’s efforts to attract £110 billion of new investment into the UK energy sector, and speed up its transition to a low-carbon economy.

“We are on the cusp of a renaissance in UK energy,” said Ed Davey, energy secretary.

The new direction in energy policy comes at a crucial time, with a fifth of UK electricity generating capacity due to close by the end of the decade.

One of the headline proposals in the bill is the setting of support for low-carbon electricity at £7.6 billion by 2020, a figure more than three times the current 2012-13 budget of £2.3 billion.

This is estimated to add £95 a year to the average household bill by 2020, a 7 per cent increase, while the current budget adds around £2 per cent to bills.
Low-carbon support will be delivered largely through long-term “contracts for difference”, which guarantee consistent revenues for investors.

These ensure that if the market price of electricity drops below a given “strike price”, investors in nuclear and renewables will be compensated. If prices rise above this strike price, the generators then pay the difference back to consumers.

Under another new proposal set out in the bill, companies are to be rewarded for investing in energy efficiency measures to reduce their electricity consumption, though some of the money for this is likely to come from the same £7.6 billion pot of support for low-carbon energy.

The bill has been welcomed by many in the nuclear and renewables industries. Deputy chief executive of RenewableUK, Maf Smith, said it would be “crucial” in setting the investment framework for the next 20 years “and ensuring that we can build on our current world lead in offshore wind and marine technologies”.