UK Energy Bill Raises Concerns
The UK government has announced its new Energy Bill, designed to shore up UK Energy needs for the next couple of decades. The feedback has not being exceptional with accusations of playing to the energy companies and not the consumers.
Consumers in the UK can expect their base energy costs to rise as the newly announced UK Energy Bill's main aim of providing confidence for the large energy companies to invest in the future of the UK energy infrastructure. £7.6 billion pounds will go towards funding low carbon energy options but most of this will come from the utilities ability to raise prices in li9ne with the infrastructure needs. The response from various industry sectors has hardly been flattering with many fearful that pushing out decarbonisation targets sees the government miss a golden opportunity to actually reduce carbon output. Despite the improved confidence for big business to invest in future energy there was little detail on how it would be realised with some concerned that the figures used to work out the plan do not take into account changing dynamics in the energy markets including increasing gas prices and decreasing renewable prices.
The Centre for Alternative Technology (CAT) has announced they will be monitoring this announcement closely. The new policies should be an ambitious step towards a sustainable future for Britain but CAT believes this energy bill represents an opportunity missed.
DECC have delayed the decision on decarbonisation targets. Without steadfast targets to decarbonise the power sector by 2030 the UK cannot hope to reach the level of reduced emissions agreed for 2050.
David Kennedy, the CCC chief executive, said, "It is important to set [a 2030] target because investors need a signal of the direction of travel beyond 2020, without that we will not get investment now that we need. There is a high degree of policy uncertainty at the moment and that needs to be addressed as a matter of urgency."
Whilst 7.6 billion a year will go to fund low carbon energies, DECC also confirmed that UK energy bills will rise. Government funding of low carbon electricity was citied as the primary reason but Britain's ageing energy grid needs investment regardless. Whether the energy mix is gas, nuclear or renewable many parts of the grid need upgrading and investment. Furthermore, renewables are a front-loaded investment. You pay more initially but your expenses are comparatively low.
Tobi Kellner, energy modeller for Zero Carbon Britain, said, "The high proportion of cost in fossil fuel energy systems is from the price of the fuel itself while the overriding cost of clean energy is upfront capital. Expenses for renewable technologies are largely for manufacturing and skilled engineering work. This is all work that can be done in the UK by British firms. Therefore all the money spent stays in the country, except for the raw materials we cannot produce domestically, and creates jobs. The costs for constructing a renewable infrastructure over the next decade may look exorbitant compared to the current model but this is an upfront investment that will benefit the economy for years to come. Reliance on dwindling fossil fuels cannot continue."
To avert a global temperature rise of more than 2 degrees, the UK must reduce carbon emissions to zero by 2030. CAT's Zero Carbon Britain report shows that a carbon neutral UK is possible by 2030. By pushing the date for an agreed target back to 2016, which is after the next national election, decarbonisation becomes an election issue. Instead of delaying, Britain needs strong leadership to show clear direction and tackle this grave threat head-on.
Warwick Business School's Global Energy Group is concerned that details of the new UK Energy Bill will fail to resolve the tension between the industry and the Government, nor provide a framework to meet the country's energy demands in the long term. The UK Government's Energy Bill tries to tackle how the nation's electricity infrastructure will be improved over the coming years. The Energy and Climate Change Secretary, Ed Davey, has to balance the need to invest in new generating capacity with commitments to a low carbon future.
David Elmes, Professor of Practice and Academic Director for the Warwick Global Energy, says it is vital the bill succeeds but he is worried it will only further complicate the picture.
Professor Elmes said: "We are concerned this bill still fails to provide a clear framework for a successful future. The Prime Minister's commitment to be the "˜greenest government ever' has been fudged by pushing any decision on a target for decarbonising electricity until after the next election. In work here at Warwick Business School we have studied the decisions and investments that companies may need to take to meet the world's future needs for energy." said Professor Elmes, referring to a book chapter entitled Governments, Policies and Companies: A Business Perspective. "One set of future scenarios we considered were developed by Shell, the international energy company. They contrasted a planned and orderly future they called Blueprint with a less certain, more chaotic future they called Scramble. By pushing out key decisions, the UK has less of a blueprint for the future and faces more of a scramble where environmental commitments the Government has signed up to may be missed and the investments needed to keep the lights on may not be made in time."
Monica Giulietti, Associate Professor of Global Energy at Warwick Business School, agrees that the Energy Bill needs to produce an environment that attracts significant investment, but she is also worried the Government has picked nuclear and offshore wind power too early.
"The key issue is investment and how it is going to happen," said Dr Giulietti. "Will the bill promote the necessary investment and to some degree are the choices of investment that this bill promotes still the right choices?
"There is still a lot of research going on into the different types of energy supply, storage and consumption. Other countries are promoting a much broader base to pick from."
Indeed, while the Bill provides a framework to support investment in nuclear and wind, the Government is still commissioning research in other areas, with Warwick Business School part of a study looking into the cost benefits of various energy storage methods.
Dr Giulietti added: "The UK is picking its winners now. The risk is that other countries will invest in methods of producing energy that are cheaper, ways to use their energy more efficiently and we will have committed ourselves to solutions that are more expensive. Also nuclear and offshore wind are big, long term projects which might not be delivered on time or work as planned."
Paul King, the UK Green Building Council CEO, responded to the announcement by stating, "It's very disappointing to see the totemic decarbonisation target has been punted into the long-grass, but agreement has been reached on some important areas, which should pave the way for more low-carbon investment. What is abundantly clear, but hasn't had the prominence it deserves, is the importance of energy efficiency, in buildings and across the economy, if we're to have any hope of meeting our carbon targets and keeping energy bills from spiralling out of control."
Lord Deben, Chairman of the Committee on Climate Change, responded by saying, "The agreement on the levy control framework is very positive. This should be sufficient to support investments in renewables required to meet the 2020 EU target and carbon budgets, together with demonstration of CCS and investment in nuclear new build. We are disappointed that a carbon intensity target will not be set until the next Parliament. This leaves a high degree of uncertainty for investors and does not address widespread investor concerns raised in recent months; it could adversely impact on supply chain investment and development of projects to come on line after 2020. It is essential now that delivery of the Electricity Market Reform proceeds on the basis that this is aimed at achieving early decarbonisation of the power sector, which is the economically sensible path in a carbon and resource constrained world."
