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DECC promises low-carbon energy but cuts spending

The UK Department of Energy and Climate Change’s Energy Bill will implement a ‘green deal’ for energy efficiency, and says it will deliver low-carbon energy. At the same time, DECC is cutting £85 million in spending...

The Energy Bill aims to deliver “a national programme of energy efficiency measures to homes and businesses.

“It may also introduce powers to regulate the emissions from coal-fired power stations, reform energy markets to deliver security of supply and ensure fair competition, and put in place a framework to guide the development of a smart grid that will revolutionise the management of supply and demand for electricity.”

"The Department also confirms previous plans for a Green Investment Bank."

Furthermore, it will “put in place a framework to deliver a future with secure, low carbon energy supplies and fair competition in the energy markets,” DECC says.

The Department also confirms previous plans for a Green Investment Bank.

At the same time however, the Bill contains measures to: “ensure that the North Sea infrastructure is available to all companies to ease the exploration of smaller and more difficult oil and gas fields.”

This is in line with Energy Secretary Chris Huhne’s assertion at last week’s All-Energy in Aberdeen, Scotland, that the Government will support both low-carbon, but will also continue its support for oil and gas.

Energy Department cuts

"DECC will have to make savings of £85m."

On Monday 24 May, the Government announced plans to cut £6.2 billion in spending from this year’s budget. DECC will have to make savings of £85m.

The reduced spending will come from cutting “waste and inefficiency”, but also by reducing what DECC calls “lower priority programme spend”.

The proposed cuts are:

  • £4.8m from administrative costs;
  • £20.2m from efficiencies across DECC’s delivering bodies;
  • £26m from “other efficiencies”. This includes £6m cuts from Regional Development Agencies (RDAs) spending and running costs; and
  • £34m from business support programmes such as the closure of the Low Carbon Buildings Programme (LCBP).

The cut in RDA funding could be a cause for concern as RDAs are playing an important role for regional development of renewable energy. Industry players have also voiced concern for the closer of the LCBP.

Industry reactions

RenewableUK’s Chief Executive Maria McCaffery, says: “We welcome the plans to introduce a new Energy Bill and the focus on promoting low carbon energy production. This will be an opportunity for a radical overhaul of the energy infrastructure in this country to secure future supply.

"The Renewable Obligation must remain."
- Maria McCaffery, RenewableUK

“Renewables are set to play a significant role in the new energy mix but the policy framework to deliver must be in place. We need a grid system that can cope with the energy demands of the 21st century and the mechanisms for attracting necessary sector investment, such as the Renewable Obligation must remain.”

David Weaver, CEO of clean-tech company Ultra Green, however, is concerned about the budget cuts: “At a time when it is crucial to solve the UK’s forthcoming energy crisis, it is ludicrous to cut the budgets so much for DEFRA and DECC. There is a lack of funding for renewable energies as it stands.”

LCBP scrapped

Concern over the closure of the Low Carbon Buildings Programme (LCBP) has also been voiced. The British electrotechnical industry association (BEAMA) says £3m will be taken from the programme, resulting in an immediate closure for new applications.

BEAMA’s Marketing Director, Kelly Butler, says: “Given the economic situation we appreciate cut backs are inevitable and not an easy task. But, BEAMA expresses concern over the funding gap represented by the LCBP closure.

“Government has rightly recognised that the Renewable Heat Incentive (RHI) would take up the role of incentivising renewable heat technologies such as heat pumps. But, we are also concerned that the Government has not now made a clear statement showing support for the RHI, which would give confidence to the market.

“The RHI consultation closed during April 2010, and BEAMA calls for fast announcements of RHI levels, with firm Government support for their introduction in April 2011.

“Without this commitment, we question the UK’s ability to ensure 12% of heat is renewable by 2020 – that is the heat contribution to the overall renewable target.”

"We always knew this would happen and there would not be any warning in advance."
- Scott McLean, Ownergy

Scott McLean, Marketing Director of Ownergy, adds: “It is a shame that the funding has closed 10 months before the Renewable Heat Incentive goes live on April 1st 2011 as it was a good incentive to build momentum of installations ahead of that date.

“However, we always knew this would happen and there would not be any warning in advance – the same happened to LCBP grants for renewable electricity installations ahead of the feed-in tariffs going live.”

He concludes: “This shouldn’t be seen as bad news though as the Renewable Heat Incentive was always designed to be incredibly financially attractive without the need for any installation grants. Nor do we see it as any indication that the Renewable Heat Incentive is under threat as this move was always anticipated.”

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Energy efficiency  •  Energy infrastructure  •  Green building  •  Policy, investment and markets  •  Solar heating and cooling