Carbon Briefing: What will the UK energy bill contain?
Energy and Climate Change Secretary Ed Davey confirmed to a committee of MPs last night that the government’s much-anticipated energy bill will be published next week, following months of wrangling by parliamentarians and observers over its draft form. With reports that negotiations over the contents of the bill are still going on, what do we know about what’s likely to be in and out?
The bill is likely to be an influential piece of legislation that frames future discussions about how the UK meets its energy needs and addresses climate change.
But following the publication of the draft bill in May, a wish list of additional provisions has emerged from bits of government, industry, NGOs and consumer groups. These include a reworking of consumer energy tariffs, the inclusion of a 2030 decarbonisation target for the power sector, and extra measures to address energy efficiency.
What’s in: electricity market reform
In December 2010, Davey’s predecessor Chris Huhne launched a consultation on the government’s proposed electricity market reform (EMR) package. This led to a White Paper on Electricity Market Reform (EMR) in December 2011, which in turn became the draft Energy Bill.
The aim of the bill is to change the way the UK generates electricity, allowing nuclear and renewable power to displace fossil fuels. Conservative MP Tim Yeo has called the proposed changes to the energy market the biggest since it was privatised twenty years ago.
EMR measures in the bill include Contracts for Difference – a support measure for nuclear and renewable power – and an emissions performance standard to limit emissions from the most emitting fossil fuel power stations.
The EMR package will also create a capacity market, which will – mainly – allow gas power plants to be paid to be available to generate electricity, rather than only be paid for how much gas they burn. This should make it more economically viable for gas plants to be used as backup for intermittent renewables.
Great, in theory. However, there are those who doubt the measures have been well thought out, with the parliamentary Energy and Climate Change (ECC) select committee strongly criticising the details of the EMR proposals back in July.
Also in: reforms to consumer energy tariffs
The Prime Minister caused something of a media furore a few weeks ago by announcing – apparently out of the blue – that the government would force energy companies to put their customer onto the cheapest possible tariff.
This surprised everyone, not least the Department of Energy and Climate Change (DECC), which hadn’t been warned. Since then, DECC have been working out what this will mean in practice.
Yesterday, it came up with the goods, announcing that from 2014 energy companies will only be able to offer four energy tariffs to consumers, and this measure will now be included in the energy bill.
Possibly in (but probably out): A 2030 decarbonisation target
Government decarbonisation advisor the Committee on Climate Change has called for the bill to make sure the power sector is virtually decarbonised by 2030, by including a target to dramatically cut the amount of carbon dioxide the power sector emits.
A wide coalition of businesses and environmental groups have backed the idea, as has the ECC committee. But power companies are split. EDF Energy, which wants to build more nuclear plants, supports the idea, while Centrica and RWE Npower say it goes too far.
Chancellor George Osborne is against the target. What’s more, since the presentation of the draft bill, which doesn’t contain any decarbonisation targets for the power sector, the government has announced that it “sees gas continuing to play an important part in the energy mix well into and beyond 2030“, which would make it much harder to reach such a target.
In evidence to the ECC committee yesterday, Ed Davey refused to be drawn on whether the 2030 target would be in the bill, giving the impression that negotiations over it are still rumbling on.
Out, but probably in eventually: more energy efficiency
Environmental groups Green Alliance and WWF are calling for the bill to contain more support for energy efficiency measures.
They have released a report highlighting government research from earlier this year showing effective measures to reduce electricity use could cut 40 per cent of electricity demand by 2030 – and that current policies will only deliver on one third of that.
At the report’s launch this morning, a spokesperson from DECC said the department will consult on demand-side measures that won’t be in the bill when it is published next week, but which could end up being introduced by amendment later on.
Conclusion: a complex bundle of legislation
Energy Bills have not been particularly rare or consistent recently – the government passed Energy Acts in 2004, 2008, 2010 and 2011, a Climate Change and Sustainable Energy Act in 2006; and a Climate Change Act in 2008.
This time, however, the reforms could potentially be wide-ranging, changing almost every aspect of the electricity market. That’s without mentioning the background of simmering political tensions over the direction they take.
Many of the UK’s nuclear and coal plants will reach the end of their natural lives over the next 10 years. With rising energy costs and the energy regulator warning of impending energy shortages, politicians’ minds are focused.
But with the government still discussing the final content of the bill, a fairly obvious split on energy policy between coalition partners, and the likely level of policy ambition, it remains to be seen whether next week’s announcement will lay the foundations for a transformational energy policy, or just add to the confusion.