UK government fails to deliver decarbonisation target in Energy Bill

Posted at November 23, 2012 » By : » Categories : News » Comments Off on UK government fails to deliver decarbonisation target in Energy Bill

Energy Secretary Ed Davey today announced key details about the Energy Bill, which will be published next week, but failed to make a decision on a decarbonisation until 2016.

The Energy Bill is designed to overhaul the energy market, providing certainty to investors to drive the necessary £110 billion of investment in the country’s infrastructure to replace elderly generating capacity that will go offline later this decade and keep the lights on.

The package of measures outlined today include the creation of a government-owned company to act as a counterparty in the new Contracts for Difference regime and the powers to implement a capacity market with auctions from 2014 to deliver capacity in the winter of 2018/19.

But controversially, and in the face of repeated calls for a 2030 decarbonisation target from many sectors, the government is only amending the bill to enable a target to be set at a later date.

According to the government’s statement, a 2030 decarbonisation target will only be considered after the Climate Change Committee (CCC) has delivered its advice on the UK’s 5th Carbon Budget, which covers that period.

Also to follow are new provisions for the gas market and a gas generation strategy, which will be published alongside the Chancellor’s Autumn Statement.

But today’s statement does confirm the amount of market support that will be available for low-carbon electricity investment under the Levy Control Framework up to 2020. Described as “broadly consistent” with the CCC’s recommendations, the level will be set at £7.6 billion for investment in renewable between 2015 and 2020.

Despite the compromises, Davey says the policies will deliver a “clear, durable” signal to investors.

“The decisions we’ve reached are true to the Coalition Agreement, they mean we can introduce the Energy Bill next week and have essential electricity market reforms up and running by 2014 as planned,” he said in a statement. “They will allow us to meet our legally binding carbon reduction and renewable energy obligations and will bring on the investment required to keep the lights on and bills affordable for consumers.”

The announcement has been welcomed by business lobby group the CBI for ending uncertainty over the details of the legislation.

“This package will send a strong signal to investors that the government is serious about providing firms with the certainty they need to invest in affordable secure low-carbon energy,” commented director-general John Cridland. “We now have political agreement… and the government should get the bill on the statute books as quickly as possible.”

The trade association for the wind, wave and tidal industry, RenewableUK, also applauded the announcement for providing the right level of support to enable a “massive expansion of renewable energy” over the next decade.

“This is a crucial announcement for the renewable energy sector,” says chief executive Maria McCaffery. “This blows the last few months of political infighting completely out of the water.”

She says that the provisions in the Energy Bill provide “exactly the kind of assurances we’ve been calling for” and will stimulate billions of pounds of private sector investment, creating more than 88,000 jobs in the sector in the process.

But Mark Kenber, CEO of The Climate Group, said the announcement was a missed opportunity.

“It does not put emissions reduction at the heart of the UK’s energy policy. It does not put the UK on a long-term low-carbon, sustainable, clean energy path. The Bill is more of a grand compromise; and like all compromises it deals more with the present and the short-term than with the future,” he warned.

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Related stories:
UK Parliamentary committee urge Chancellor to back energy policy (20-Nov)
UK business leaders echo call for 2030 power sector decarbonisation (14-Nov)
Renewable, nuclear and CCS industries unite to call for UK decarbonisation target (5-Nov)
UK businesses calls for 2030 carbon target to unleash investment (8-Oct)

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