From a decarbonisation target to new nuclear contracts: The key amendments in this week’s energy bill debates
The House of Commons is gearing up for a last, crucial round of debates on the energy bill before it gets sent to the Lords for consideration.
MPs will debate a swathe of suggested amendments, and hope to bring some much needed clarity to the nuts and bolts of how the six-month old bill will work.
Here are the four most important amendments to look out for.
Decarbonisation target
The most high-profile amendment is intended to send a signal to the markets that the government is committed to the UK’s low carbon future. It would require the government to set a hard target for decarbonising the power sector, and if adopted would effectively rule out a UK ‘dash for gas’, ending speculation over the direction of government energy policy.
Energy and Climate Change committee chair Tim Yeo put forward the amendment, which calls for an emissions target to be set in line with recommendations from the Committee on Climate Change (CCC). The CCC has previously called for power sector emissions to be limited to 50 grams of carbon dioxide per kilowatt hour by 2030. The target would curb the use of fossil fuels without carbon capture and storage technology.
The Department of Energy and Climate Change wants to defer a decision over adopting such a target to 2014, but the amendment would force its immediate inclusion. The decision to defer has been interpreted as a partial victory for the Treasury as it potentially clears the way for more gas generation – a source of tension between Chancellor and Liberal Democrat DECC minister Ed Davey.
The Liberal Democrats voted to support a decarbonisation target at their conference in 2012, with a number of MPs indicating they would defy the government and vote for the amendment this week. It is unclear whether or not there is enough support to push the amendment through against the government’s wishes, however.
Contracts for difference
There is also hope the government will clarify how it intends to balance nuclear and renewables investment opportunities under the new contracts for difference system.
Renewable technologies currently receive a public subsidy through the renewables obligation which is set to be replaced by a new scheme in 2017 called contracts for difference. But it’s unclear exactly how the government will divvy-up the money available under the Levy Control Framework budget, which will rise to a maximum of £7.6 billion in 2020.
Contracts for difference were initially devised as a way to incentivise investment in new nuclear as well as renewables – a key pillar of DECC’s investment plan. The contracts set a guaranteed price for electricity – known as the strike price – with the government paying the difference to the generator if the wholesale price of electricity dips below this.
An amendment by Green MP Caroline Lucas seeks to prevent contracts for difference being offered to nuclear generators. This would be a major blow to the government which is already locked in negotiations with EDF over the level of the strike price and the length of the contracts.
It has been reported that the government wants a price around £80 per megawatt hour while EDF is holding out for something nearer £100. The nuclear contract could potentially last up to 40 years, while renewables are set to be offered 15 year contracts.
Six renewable energy companies expressed concern that the new mechanisms unfairly favoured the nuclear industry when the changes were announced back in May 2012. While the contracts for difference certainly look like a generous government subsidy, DECC maintains it is not using public money to support building new nuclear.
The government will be expected to offer some indication of how it will proceed without biasing either industry in the debates this week.
Grid capacity
There are a brace of amendments are designed to help the government match electricity supply and demand in the most efficient way.
The Energy Minister Greg Barker is set to push for an amendment which would allow the government to pay businesses to reduce their electricity usage at peak times, as an alternative to getting electricity generators to produce more power. Businesses would compete with energy generators in a new capacity market. The idea is referred to as negawatts, it’s the cheaper option according to Barker and the amendment isn’t expected to be controversial.
A potentially more interesting prospect is an amendment from Energy and Climate Change committee member and Labour MP Barry Gardiner. The amendment would require all old coal plants to comply with the emissions performance standard (EPS) by adding carbon capture and storage (CCS) technology. At the moment the standard only applies to newly built coal plants. Without the amendment, the energy bill could allow the dirtiest power plants of all to be used alongside an increasing amount of low carbon energy sources to ensure the lights stay on.
Those are the key issues. So get set for two more days of energy bill argument and pontification in the House of Commons – then it’s the Lords’ turn.