Draft energy bill published
The Department for Energy and Climate Change has published the draft text of a much-discussed energy bill.
sets out plans for a feed-in tariff with Contracts for Difference (CfDs for some types of generation and a capacity market. Both will be administered by National Grid, as "independent System Operator".
In addition an Emissions Performance Standard will prevent construction of new coal plants which emit more than 450g/kWh of carbon.
Energy secretary Ed Davey said that energy bills would increase over the coming years, but "electricity market reforms will help to reduce the amount".
A separate strategy on the role of gas will be published in autumn 2012.
Decc said the bill had been introduced in draft to allow pre-legislative scrutiny, saying it would speed up its passage through Parliament and ensure for more robust legislation. Decc said the Bill, once introduced into Parliament, is expected to achieve Royal Assent in 2013, so that the first low-carbon projects can be supported in 2014.
All of the policies in EMR extend to Scotland and Wales. Energy policy is devolved to the Northern Ireland Executive which has agreed that extension of CfD, FID Enabling and EPS provisions will apply to Northern Ireland.
The draft Energy Bill also contains proposals to:
Create an independent, industry financed statutory regulator, the Office for Nuclear Regulation;
Enable the sale of a Ministry of Defence asset, the Government Pipeline and Storage System (GPSS)
Introduce a Strategy and Policy Statement which would set out the Government's strategic priorities for the energy sector in Great Britain, describe the roles and responsibilities of bodies who implement or are affected by GB energy policy and describe policy outcomes which are to be achieved by the regulator and the Secretary of State when regulating the sector.
Further details here.
By Nick Molho, head of energy policy , WWF-UK
Statement: As made clear by the Committee on Climate Change, decarbonising the UK's power sector by 2030 is an absolute necessity if we are to stand any chance of meeting our legally binding commitments under the Climate Change Act. The Energy Bill provides the UK Government with a unique opportunity to do just that.
What s needed is for the Government to state a clear ambition for renewable energy in the UK beyond 2020 and to provide financial support mechanisms that are specifically designed for the renewables sector. As it is, it looks like the process has been rigged for nuclear."
By Daniel Grosvenor, head of Deloitte s nuclear team,
Statement: The announcement of DECC s draft Energy Bill is an important milestone in the Electricity Market Reform and shows that progress is being made. However, this momentum needs to continue as there is still much work to do to finalise the arrangements proposed to ensure there is no delay in investment while the new system is put in place. This is vital in order for final investment decisions on key low-carbon projects including nuclear projects like EDF and Centrica s Hinkley Point C to be made before the end of the year. Completing work on these Transitional Arrangements, continuing to make progress on EMR and providing certainty for any potential investors is crucial to securing investment in low-carbon generation in the UK, as these huge infrastructure projects could bring significant benefits to the UK economy.
By Ben Caldecott, head of policy, Climate Change Capital
Statement: "We welcome the draft Energy Bill and believe that it sets out ambitious reforms that can attract the investment needed to renew Britain's infrastructure. Whether the package is successful, however, depends entirely on its effective implementation and there is still much that needs to be clarified, especially how we can avoid locking in too much new, import dependent, high-carbon infrastructure."
By David Porter, chief executive, EnergyUK
Statement: The investment challenge we re facing is huge. Around 200 billion is required to give us the secure and reliable low-carbon energy supplies we need for the future. The market we have now simply won t bring forward that investment. Publication of the Energy Bill is an important step forward. These are wide-ranging reforms, and we will be working closely with the Government in the months ahead to ensure that the final outcome provides clarity for investors and brings forward the low-carbon investment needed.
By Joss Garman, senior energy campaigner, Greenpeace
Statement: This is an energy omnishambles. This draft law is bad news for people struggling to pay their household bills, bad news for the UK s renewable energy industry and bad news for our attempts to tackle climate change.
The government have missed a huge opportunity to get energy bills and carbon emissions under control, and to bring security to our power supplies. There s a huge hole where the government should have encouraged energy efficiency measures. These would be the fastest and the cheapest way to bring down both bills and emissions.
The government should also have backed our home-grown renewable energy industry, but instead this shambles of a bill will make it harder to invest in this important sector. Supporting this vital industry would boost the economy and reduce consumers exposure to rocketing gas prices.
The coalition has decided to throw billions of pounds at the failing nuclear industry, which is going to send household bills even higher.
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By Neil Bentley, CBI Deputy Director-General, said
Statement: While it is reassuring to see some progress on the Energy Bill, it s now important that Parliament not only gets it right, but does so as a matter of urgency. With over a fifth of the UK s generating capacity coming off stream before 2020, we face a real risk of electricity shortages in the second half of the decade.
The clock is ticking to create the market certainty that will unlock billions of pounds of private sector investment, generating many new jobs across the UK, and securing an affordable supply of energy.
We are still some way from having a detailed picture of how the electricity market will look in the future, on which the success of these reforms depends. With major investors waiting in the wings, these details are needed as soon as possible.
Paul Steedman, Friends of the Earth Senior Energy Campaigner
Statement: The Government needs to stop obsessing over a way to make the sums for nuclear power add up, stop our homes leaking heat and switch the country from dirty gas to clean British energy from wind, sun and water to help hard-pressed households with their bills.
After 18 months of dithering, this Bill doesn t even set out a clear purpose, when it should make a simple commitment to decarbonising our electricity supply by 2030.
All the Bill contains is a desperate attempt to prop up the dying nuclear industry and a way of letting in dirty gas by the back door, even though soaring gas prices have led to rocketing bills.
More gas and new nukes will only add to bill payers pain.
By Richard Lloyd, Which? executive director
Statement: "The Government is right to address the complex issue of future electricity generation and how best to invest in low carbon power. However, there are many unknowns and whilst it is encouraging to hear the Energy Secretary promising that these plans will be good news for consumers we want to see more evidence and the small print before we can judge whether this will work for all of us who are expected to foot the bill.
"The Government must be transparent and allow full scrutiny of these reforms, particularly on the contract negotiations for new low carbon generation. Contracts for Difference could see potential savings for consumers but the Government must be honest about the cost that this investment will involve.
"Alongside the measures in the draft Energy Bill, we also want to see comprehensive reform of the retail market to ensure it works for consumers and an effective energy efficiency strategy to help many more people save money. Ministers must have consume...[comment was too long]
By Will Straw, IPPR Associate Director
Statement: The Carbon Price Floor risks giving energy and climate change policy a bad name because it will do nothing to reduce carbon emissions while piling more cost on to the shoulders of already hard-pressed consumers in the UK.
Because a floor price for carbon in the UK will depress the carbon price elsewhere in Europe, the UK will effectively hand over billions to European polluters. At a time of austerity and efficiency, wasting 1 billion is inexcusable. Instead, we should be pushing for an EU-wide carbon price floor.
Because the market is Europe-wide, a higher price in the UK due to the carbon price floor will lead to a lower price elsewhere and to the same amount of carbon being emitted.
By From Npower response http://bit.ly/JkPmh2
We feel less clear about the shape of the EMR package now than we did 6-12 months ago. The proposals for the contract for difference have become increasingly complex and far removed from what we, the wider industry and the investor community expected (i.e. a commercial contract, backed by government).
A credible counterparty is needed for the CfD mechanism to give investors confidence. The support mechanism must been seen to give secure and appropriate returns over the long-term. Increased risks for investors will translate to a higher cost of capital for major projects and unnecessary extra cost for Britain.
The multi-party statutory instrument between low carbon generators and all suppliers is an unfamiliar concept and lacks precedent. There are serious questions being raised about its bankability by all stakeholders.
By Robert Sansom, IET
Statement: We are surprised that no reference is made to demand in the announcement made today. Support for low carbon generation will inevitably result in higher prices for consumers, but these price increases can be offset by improvements in energy efficiency, thereby reducing energy consumption, which is also better for the environment. In addition demand has a crucial role to play in reducing the amount of capacity required. The reforms to the electricity market must recognise this role and ensure incentives are available to reward customers accordingly.
By Corin Taylor, Senior Economic Adviser, Institute of Directors
Statement: "Businesses need clean, secure and affordable energy, but we're concerned that the draft Energy Bill may fail to deliver. We need to see a technology-neutral approach adopted as soon as possible, so that the cheapest low-carbon energy sources are prioritised, but the Bill confirms that the Government will try to pick energy winners for at least another decade. We hope that the contracts for difference framework will succeed, but it looks like an overly-complex way of delivering much-needed investment in Britain's energy infrastructure."
By Ronan O Regan, director, energy, PwC
Statement: There are no policy u-turns in the draft Energy Bill, so even where the detail has yet to be confirmed, its consistent with the direction presented previously. From an investor perspective, this consistency in policy is important. The key thing is that the draft Energy Bill has been included in the current parliamentary session.
There is some more detail about the transition between the Renewables Obligation system and the Contracts for Difference system, which should reduce the risk of a hiatus in investment while the new system is implemented.
The move to bring forward the introduction of the capacity mechanism to have it available from 2014 if required, is important. This gives a lot more flexibility in managing security of supply risks."
There are still question marks around the legal framework and payment model for the Contract for Difference."
By Alistair Smith, Chairman of the Power Division of the Institution of Mechanical Engineers
Statement: The Energy Bill is not just welcome but essential if the UK is to maintain a secure energy supply, while at the same time cutting carbon emissions at an affordable cost to the consumer. Although this Bill effectively kills off the idea of a truly open UK electricity market, this legislation is necessary in order to encourage companies to build a balanced electricity generating mix, with the correct proportion of baseload nuclear power along with the right balance of intermittent forms of renewable energy such as offshore wind power backed-up by reliable gas-fired generation.
If these reforms are rejected by the power industry because they don't like certain elements, it may be time for the Government to consider re-taking control of this essential element of our national infrastructure. The UK needs certainty now if we are to avoid jeopardising our security of supply in the relatively near future.
By Matt Bonass, climate change and corporate finance lawyer at Bird & Bird
The impact of the draft Bill on investment and project development is a concern as it is presented for pre-legislative scrutiny only at this stage. While this gives more time for debate on the details, it will do little to provide investors with the certainty they are looking for.
While the broad themes of Electricity Market Reform are set out, the devil remains in the detail and there s still considerable uncertainty as to the final form of any secondary legislation, for example on CfDs and the capacity market.
We ve seen from other UK renewable energy policies, such as small scale Feed-in-Tariffs and the RHI, that there can be a long lead time between initial enactment of primary legislation and the introduction of secondary legislation, so uncertainty is likely to continue for some time yet.
The great enemy of investment is uncertainty, and there remains much of that in the Bill.
By Nigel Hughes, Director, Energy UK, Itron
The Draft Energy Bill is markedly lacking in further policy on efficiency, despite that being the fastest and cheapest way for the UK to bring down bills and emissions.
Of course, power generation is an essential aspect of driving the low carbon economy, but it needs to be driven in tandem with energy use mitigation.
Government has set out its ambitions for the smart meter roll out to address UK energy efficiency. A clear strategy that tackles the issues that coincide with such a challenging roll out, such as security and interoperability, will be key to helping the nation make full use of demand management technologies. The provision, management and interpretation of accurate consumption data that smart meters provide will be the difference in the UK s search to decarbonise the energy supply chain.
As stated in the impact assessments, Smart metering brings the opportunity to save around 10% on energy bills and concentrating on efficiencies may help the U...[comment was too long]
By Gordon Edge, Director of Policy at RenewableUK
Statement: The timeline DECC has laid out looks very challenging to bring in wholesale change to the electricity market. As this is coming at a time when traditional energy sources are coming to the end of their lifespan, DECC needs to ensure that they continue to consult in order that an energy gap does not appear. A gap means fewer options for the UK, which means we risk missing carbon reduction targets, continuing our dependence on imported fossil fuels and energy bills not being insulated from the rising costs of fuel. Furthermore, the wind and marine renewables supply chain needs to be sure that there will be sufficient orders if they re to base operations in the UK, bringing the jobs and cost savings that we and the Government are keen to see.
We re pleased that DECC has engaged and listened on areas like the power purchase agreements and will be asking for evidence on these and that they are willing to look at the role a counterparty can play on the contract for differen...[comment was too long]
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