By Renewable Energy Focus staff
Although the UK Coalition Government has stated it will only allow new nuclear without public subsidy, but the ECCC points out that subsidies will still be provided through new long-term contracts and a carbon price floor that could hand nuclear the windfall profits.
| “Cleaning up our power sector will cost money, but the long-term benefits for the UK or having a secure, reliable and low-carbon electricity system are clear.” |
| - Tim Yeo, ECCC Chair |
ECCC Chair, MP Tim Yeo, says: “Ministers believe that new nuclear could play a key role in keeping the lights on and meeting our climate change targets – but they don’t want to own up to supporting it.
“This is understandable given the promise they made not to subsidise nuclear, but it would be deeply irresponsible to skew the whole process of electricity market reform simply to save face.
“The Government must be up front about the support it is giving to nuclear and not hide subsidies in a one-size-fits-all design for long-term energy contracts.”
Need £110bn by 2020
The UK will need around £110 billion of investment by 2020 to replace aging power stations, cut carbon emissions and maintain energy security. The ECCC says it is concerned that the current EMR proposals are too complex and could fail to attract this level of investment.
Simplicity is needed to provide more certainty for investors, and the Government should provide clearly defined objectives to reduce the carbon intensity of electricity generation to 50 g/kWh of CO2 by 2030.
The ECCC’s conclusions include:
- The wholesale market need reform to break up the dominance of the ‘Big 6’ energy companies to allow new entrants and new capital;
- Feed-in tariffs with Contracts for Difference will work for nuclear, but for renewable and other clean technologies, different types of contracts are needed;
- It is too early for the Government to design a capacity mechanism given the rapid development of smart meters, interconnectors and storage systems that could remove the need for ‘peaking plant’; and
- The Carbon Price Support is necessary in the short-term as a solution to weaknesses in the EU Emissions Trading System (ETS), but it will increase costs for consumers and could provide a windfall for nuclear and renewable generators.
Yeo adds: “The Government must go back to the drawing board and come up with a more straightforward and coherent set of plans to reform the electricity market.
“Radical reform of the wholesale energy market is needed to stop the Big 6 from stitching it up, but at the moment Ministers are only thinking at the margins.”
He concludes: “Cleaning up our power sector will cost money, but the long-term benefits for the UK or having a secure, reliable and low-carbon electricity system are clear.
“In the short to medium term bills will rise, but in the long term people will see savings – Ministers should be open about that.”
| “…major investments cannot go ahead until the policy framework is clear.” |
| - David Porter, CEO of the Association of Electricity Producers |
Industry reactions
RenewableUK says that in order to ‘seal the deal’ on renewable energy, the Government needs to get two policy areas absolutely right: the EMR and the 2020 delivery roadmap.
Dr Gordon Edge, RenewableUK Director of Policy, says: “As the ECC report has stated, the ‘one size fits all approach’ of the current EMR proposals could be benefiting other technologies more than renewables. This needs to change if the UK is to attract investment both in renewable projects and the manufacturing facilities announced in the last six months.”
In addition to steady long-term support for wind, wave and tidal energy in the EMR and the ROC review, RenewableUK is asking the Government to back a strong target for offshore wind in the upcoming 2020 delivery roadmap. “RenewableUK correctly predicted that the UK’s offshore sector would attract unprecedented manufacturing interest. We now need a healthy 2020 target to convert that surge of interest into jobs and factories.”
David Porter, Chief Executive of the Association of Electricity Producers, adds: “The Select Committee points to some of the difficult issues associated with electricity market reform, but, it falls to government to resolve them. With the industry’s help, it must do that, because major investments cannot go ahead until the policy framework is clear. Companies want to invest to avoid power shortages and make the transition to a low carbon electricity industry. But, the sums of money involved are huge (£200 billion by 2020) so, the political risks have to be minimised. And, even when market reform is agreed, it has to win the confidence not just of the UK energy businesses, large and small, but, of the wider world of investment.
“The Select Committee also says that it wants to see new entrants in the electricity industry and to attract them it calls for deeper reform than the government has proposed. Britain is widely acknowledged to have one of the most competitive energy markets in the world and new entrants will continue to be welcomed. But, deeper reform – somehow going much further than the government’s proposals – would take much longer, create uncertainty and could lead to deferral of investment.”
Juliet Davenport, CEO Good Energy, says: "We're pleased that the Committee has recognised the importance of building the necessary infrastructure to encourage investment in a decentralised energy market, which is, after all, the energy market of the future. By calling for "different FITs for different technologies", the Committee clearly recognises that the Government's existing proposals are not sufficient to support and encourage local, decentralised, renewable energy. I hope the Government's White Paper reflects this, but suspect the key lies in David Cameron balancing the Treasury's work on reducing the deficit with his pledge to lead the Greenest Government Ever."