United Kingdom

Energy Bill may lead to dash for gas and actually favour nuclear

There are mixed views on the impact of the UK’s draft energy bill due for release today. The Department of Energy and Climate Change (DECC) has said that £110 billion of investment over the next decade is needed to boost clean electricity generation, but some are concerned the proposals will favour nuclear and especially gas over renewable sources such as offshore wind.
Energy Bill may lead to dash for gas and actually favour nuclear

The UK government's draft energy bill is to be unveiled this afternoon and is expected to include a series of reforms to the energy market designed to boost major investment in clean energy generation and drive down demand through energy efficiency measures.

The bill is expected to set out long-term contracts to encourage investment in nuclear and renewable energy in order to plug the gap caused by the closure of a number of coal-fired and nuclear plants. The government believes the measures will also help reduce the UK’s reliance on imported gas, which could rise sharply without taking the necessary steps.

"We need to make sure the bias towards gas is dealt with... and that low carbon sources can compete on a level playing field," Energy Secretary, Ed Davey, told the BBC. "With nuclear capacity and coal capacity coming offline, we need a market structure to keep the lights on. To get investment, we need to give investors certainty that will lower the cost of capital.

However, Davey told the BBC that this did not mean public subsidies for new nuclear plants, and said that electricity bills would have to rise to pay for the measures that are called for. "There will be no blank cheque for nuclear - unless they are price competitive, nuclear projects will not go ahead," he stressed. That said, he also added that bills would rise even further if no action is taken to reduce the UK’s dependence on imported fuels.

Dash for gas

Despite the Government's plans for plugging the energy gap and ensuring gas imports do not rise, some warn the complex new support system proposed in the draft energy bill which will replace the current feed-in tariffs for renewable energy will in fact favour larger suppliers, fossil-fuel sources like gas, for which power stations can be built quickly and cheaply, and nuclear power.

The “contracts for difference” system as it is known would permit companies to sign long-term contracts that pay a steady rate of return for energy over the lifetime of new low-carbon generators, to overcome the high capital cost of building nuclear power plants or offshore wind.

Some MPs and environmental experts though have suggested the system will help nuclear, but not other clean low-carbon power such as offshore wind, and have highlighted the plans amount to a subsidy for new nuclear reactors. They also warn there could be a dash for gas by actually increasing the UKL’s demand for expensive gas to generate electricity.

"This is a looming energy omnishambles. The energy bill could be a huge opportunity to get energy bills and carbon emissions under control, and to bring security to our power supplies. But ministers seem hell-bent on scuppering all of these aims by encouraging a big increase in our dependence on burning expensive gas to generate electricity. This would increase the burden on families and businesses, and see money from bills going to countries like Qatar and Norway instead of back into the British economy," warns John Sauven, Executive Director of Greenpeace UK.

Saudi Arabia of wind and rain

Meanwhile, Sir Graham Watson MEP says the UK could be "the Saudi Arabia of wind and rain", if the draft bill is amended to focus more on renewable energy.

Commenting ahead of the coalition's publication of the draft energy bill this afternoon, Sir Graham Watson MEP, who is the Chairman of a global network of MPs and MEPs from all mainstream political parties campaigning for renewable energy and electricity supergrids called the Climate Parliament, the Lib Dem MEP for the South West and President of the ELDR party, said: "For some years yet we will need to derive energy from a variety of sources, including nuclear. But what we should really be focusing on are electricity cables to other parts of Europe to share the renewable energy sources across the continent - and provide a lucrative export market for home-grown British wind, wave and tidal in times of plentiful supply."

"An electricity cable to Norway or Germany costs three times less than a new nuclear power station, and can provide flexible storage and back-up capacity rather than nuclear's baseload supply that can go neither up or down."

Energy minister Charles Hendry is to visit Iceland this month to discuss a new UK-Iceland electricity cable to import the island's geothermal power. Sir Graham continued:

"We could lay cables to Norwegian hydro, Icelandic geothermal, North Sea wind and even southern European solar. Our bills don't need to go up - the United Kingdom could become the Saudi Arabia of wind and rain."

A recent Environmental Audit Committee’s report ‘A Green Economy’ also reinforces the call for the Government to put renewable energy at the heart of its economic recovery and employment strategy. Furthermore, the Renewable Energy Association’s (REA) report ‘Renewable Energy: Made in Britain’ shows the UK sector employed over 100,000 people and turned over £12.5 billion in 2010/11. However, the UK is in danger of failing to fulfil its potential. Around 400,000 people are needed in the sector by 2020 to meet binding EU targets, but the industry faces serious skills shortages and uncertainties in the policy framework.

"The Government needs to enrich its understanding of the benefits of renewable energy investment. Currently this debate is being pushed forward on an ad hoc basis by various timely reports and well-informed politicians from all parties. There is frustration that Government leadership is missing in practice, despite notable speeches, for example by Nick Clegg, on the importance of prioritising investment in energy infrastructure,” says Gaynor Hartnell, Chief Executive of REA. “Several countries, from America to Japan to Germany, have realised that taking the long-term view and investing in renewables is a significant step on the route out of economic malaise. The UK renewables industry wants to work with the Coalition Government to realise the huge contribution our sector can make to jobs, growth and prosperity."

Secretary of State, Edward Davey has said “every step the UK takes towards building a low-carbon economy reduces our dependency on fossil fuels, and on volatile global energy prices. The more we can shift to alternative fuels, and use energy efficiently, the more we can ensure that our economy does not become hostage to far-flung events and to the volatility of market forces”. The question now is whether the much-awaited Energy Bill will ensure this happens.

For additional information:

DECC - Energy Act 2011

Electricity Market Reform White Paper

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