UK Energy Bill will deter investment and add costs, warns committee

Posted at July 24, 2012 » By : » Categories : News » Comments Off on UK Energy Bill will deter investment and add costs, warns committee

The UK government’s proposed Energy Bill will impose costs on consumers, deter much-needed investment and lead to less competition in the market, warn a committee of MPs today.

The Bill is supposed to reform the electricity market through a new system of long-term contract for energy generators to guarantee a price for low-carbon electricity and reduce the risk of investment in projects with high up-front costs like offshore wind farms or nuclear reactors.

But chair of the Energy and Climate Change Committee, Tim Yeo, has slammed the report saying that the government is “in danger of botching its plans to boost clean energy”.

Following an examination of the draft legislation, the Committee highlights that under the new model for the Contracts for Difference (CfD), which will be introduced by the legislation, the government will no longer guarantee the contracts.

Instead the liability will be spread across various energy companies, raising concerns that the plans are “too complex and possibly not legally enforceable”.

“Electricity market reform is essential, but the new contracts proposed by the government will not work for the benefit of consumers in their present form,” says Yeo. “The government has a lot of work to do over the summer to make sure that the Bill is fit for purpose in the autumn.”

The Committee also criticizes the spending cap introduced by the Treasury to limit the green levies that can be passed on to customers.
The levy cap will potentially ration the number of contract available, creating uncertainty among investors, warn the MPs.

“Nobody wants to see a blank cheque written out for green energy, but the government must provide investors with more certainty about exactly how much money will be available,” says Yeo.

He also warns that community-owned projects and independent generators could also be squeezed out of the market under the current plans.

But Energy and Climate Change Secretary Ed Davey defended the Energy Bill, saying it would secure, low carbon, affordable energy.

“We are determined to use the pre-legislative scrutiny period to develop a robust and effective Bill with the interests of both consumers and investors at the heart. The Committee’s input will be extremely valuable as we do this,” he commented.

Environmental group Friends of the Earth is urging the government to take on board the Committee’s advice.

“This report really hits the nail on the head,” says campaigner Andrew Pendleton. “The government must listen to the Committee’s advice and set a target to decarbonise our electricity system by 2030, slash energy waste and unleash a revolution that allows us all to benefit from affordable and clean energy.”

The damning report on the plans follows the surprise resignation of the permanent secretary to the Department of Energy and Climate Change, Moira Wallace.

Wallace has headed the department since it was established four years ago but is now leaving the civil service and taking a sabbatical before embarking on another role.

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Related stories:
Scottish Energy Ministers questions electricity market reform (21-Jun)
UK government publishes long-awaited Energy Bill (23-May)
Energy companies warn UK government over support for renewable (17-May)
Queen’s speech promises reform of UK electricity market (10-May)

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