Three experts assess the recently published draft Energy Bill
Introducing the draft Energy Bill last month, Ed Davey explained that it was an attempt to ‘keep the lights on, bills down and the air clean’. No government is going to let a blackout happen but the Bill and other parts of the Electricity Market Reform will miss the mark on carbon reduction and cost.
The government’s approach to securing supply is based on replacing dirty coal with nuclear and renewables in the long run while ramping up gas in the interim. But the Energy Bill is perplexing potential investors with uncertainty about the administration of incentives for low carbon generation. Even if this is resolved, the private sector looks unlikely to deliver the government’s ambition of 18 gigawatts of new nuclear capacity. Without an adequate focus on renewables, the result will be an increase in reliance on imported gas.
There was near consensus in Parliament when the 2008 Climate Change Act bound future governments to reduce greenhouse gas emissions against 1990 levels by at least 34 per cent by 2020 and 80 per cent by 2050. The Committee on Climate Change, which advises the government on setting and meeting carbon budgets, had judged that meeting the 2050 emissions reduction target
“will only be achievable if electricity generation is almost completely decarbonised by 2030”. But to allow for this ‘dash for gas’ the small print of the Energy Bill suggests that this ambition will only be reached ‘by the 2030s’ with the intensity of carbon emissions expected to be double what the CCC had recommended.
Meeting our legal obligations will mean amending the Bill so that the intensity of emissions from the power sector is capped at 50g of carbon dioxide per kilowatt hour (Co2/kWh) by 2030 as the CCC has suggested. All polluting gas production after 2030 must only be allowed to plug the gap in intermittent transmission from renewable sources such as wind.
Reliance on gas is also expensive and has driven nearly two-thirds of rising energy costs since 2004. But the creation of a minimum carbon price, part of the wider Electricity Market Reform, will put up prices even more. The intention was to reduce uncertainty and provide a strong incentive for investment in low-carbon generation. While this is fine in principle, Britain is allowing itself to be undercut by its European partners by taking unilateral action.
The government’s own estimates suggest that as prices rise at least 30,000 to 60,000 more households could fall into fuel poverty in 2013, increasing to 50,000 to 90,000 in 2020. Research by IPPR showed that the policy could waste up to £1 billion. The CBI are concerned about the impact on the energy-intensive sector which employs 225,000 people.
A far better approach would be an EU -wide carbon price floor, potentially through the creation of a carbon bank which would buy and sell emissions permits to keep a steady price.
The Energy Bill was a golden chance to meet Britain’s energy needs, keep prices competitive, and lead the way on tackling climate change. The Coalition’s approach only deserves one cheer.