Energy Bill reaction: Low carbon energy industries welcome measures

by ClickGreen staff. Published Thu 29 Nov 2012 10:45, Last updated: 2012-11-29
Details of the Energy Bill to be unveiled today
Details of the Energy Bill to be unveiled today

The Carbon Capture and Storage Association, the Nuclear Industry Association and RenewableUK welcomed the introduction of the Energy Bill by Energy Secretary Ed Davey MP this morning.

The three Associations, representing over 1,000 corporate members said the government’s proposals for reforming the electricity market would help to unlock billions in investment in low carbon generation, enable the UK to meet its energy security and climate change targets, and create thousands of jobs.

Over the next 10-15 years around 95,000 jobs could be created across all three sectors.
The Associations today urged politicians across all parties to work together to ensure the UK delivers its energy and industrial potential to the full.

Keith Parker, Chief Executive of the Nuclear Industry Association said: “The Bill provides much needed investment certainty. A major nuclear new build programme will lead to substantial industrial and employment benefits – including considerable opportunities for the UK nuclear supply chain and a boost for UK manufacturing and construction.”

Jeff Chapman, Chief Executive of the Carbon Capture and Storage Associations said: “The publication of this Bill will give a good deal more confidence to those businesses that are developing the UK’s first CCS projects and laying the foundation of a world leading industry.”

Maf Smith, Deputy Chief Executive of RenewableUK said: “This Bill is crucial in setting the investment framework for the next 20 years and ensuring that we can build on our current world lead in offshore wind and marine technologies, and guarantee clean domestic power and tens of thousands of green jobs”.

And other sectors of the UK economy cheered today's arrival of the Energy Bill.

John Cridland, CBI Director-General, said: “Energy-intensive manufacturing is finally getting its place in the sun today, by the exemption from necessary new energy costs. This is vital for such companies to play a key part in our low-carbon economy and it is good news that the Government has listened to our calls to build in support at this early stage, which will ensure we reap the full economic benefits at the earliest opportunity
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“Equally important is the welcome boost the Bill gives to investor certainty. It will be crucial for investors to see the momentum kept up in Parliament so that the Bill can get onto the statute books as quickly as possible.

“The next vital debate is to decide how to improve energy efficiency and deliver real benefits to the economy. The current policy landscape is too complex, so we will look forward to seeing how today’s electricity demand reduction proposals can move us towards a simpler, more strategic approach.”

However, Friends of the Earth’s Executive Director Andy Atkins said: “This Energy Bill will lock the nation into increasingly expensive gas, condemn cash-strapped households to rising fuel bills and threatens the nation’s targets for tackling climate change.

“Ministers must nail the lie that green policies are behind soaring fuel bills – it’s the rocketing price of gas that’s overwhelmingly responsible for the misery inflicted on consumers.

“MPs must support an amendment for a decarbonisation target to give businesses confidence to invest in clean energy to deliver new jobs and investment and a power system we can all afford.”

Nick Molho, Head of Energy Policy at WWF-UK said: “Today’s Energy Bill is a unique opportunity for the Government to finally speak with one voice in support of the renewables sector. David Cameron must now put an end to months of Government infighting which have badly damaged investment confidence in one of the UK’s few sectors of economic growth.

“The ultimate test for the Bill will be through strong amendments on energy efficiency and a decarbonisation target that hold the Government to their commitments. Consistent political messages are now more important than ever in boosting investor confidence.”

WWF-UK said it welcomed the launch of the consultation on energy efficiency but warned that this consultation had to deliver concrete results in the months to come if the UK was serious about moving towards a low-carbon economy at lowest cost to consumers.

Nick Molho said: “Energy efficiency is a no-brainer for the environment, the economy and consumers and could reduce our power sector costs by more than £10bn a year by 2030. We have to go beyond saying warm words about energy efficiency and finally make of it a core element of our energy policy. The economic benefits at stake – and the risks if we don’t take them for people’s bills – are simply too big to ignore.”

Looking forward to the Gas Generation Strategy expected new week, WWF-UK pointed out that only limited amounts of investment were needed in new gas generation out to 2030 and urged the Government not to go down the route of another dash for gas, which would have detrimental environmental and economic impacts for the UK.

Nick Molho added: “A large part of our gas already comes from abroad, and Government and International Energy Agency’s forecasts warn that UK gas prices and dependence on imports will rise, so it makes no strategic sense to increase our reliance on this fossil fuel. The time has come to deploy renewable energy on a big scale in the UK and move away from our excessive reliance on gas for the sake of people’s bills, our economy and the environment.”

Tony Cocker, Chief Executive of E.ON UK, said: “We welcome the publication of the Energy Bill which paves the way for a transformation of the electricity market between now and 2030. This is a real opportunity to shape the future path of energy in the UK and it must be grasped with both hands.

“Each detailed proposal must now be checked to ensure that it meets our ‘trilemma test: is it fair to consumers?; will it help keep the lights on?; is it part of decarbonising the UK?

"Given that family finances are being squeezed more than ever at the current time, we must all ensure that UK consumers are at the heart of these reforms and that they do not have to bear any more costs that cannot easily be justified, like the carbon price floor which is due to hit electricity prices next year.”

While the REA said it strongly welcomes Government’s commitment to renewable energy and the commitment of funds under the Levy Control Framework, it called on the Government to give clarity as soon as possible on how these funds will be allocated across renewables, nuclear, CCS and potentially energy efficiency measures.

REA Chief Executive Gaynor Hartnell said: “The devil will be in the detail, which we have yet to fully examine. However, if the new regime is implemented sensitively, consumers and green generators should both win.

“Electricity customers will only pay what is necessary to move the UK towards a more sustainable and secure energy future. That’s because, with these new contracts, if the price of electricity increases, the amount of subsidy required can fall. Generators should get a stable price, provided they achieve the fair market price for their electricity. That’s why it’s essential we have a route to market which guarantees this.

“We can’t afford to be complacent, however. It is vital that confidence in the policy framework is established quickly given the investment hiatus we face. There is still much work to do, to translate the legislation into clear and effective policy. We look forward to working closely with DECC to ensure our members can have full confidence in the new framework as quickly as possible.”

The Solar Trade Association also welcomed the publication of today’s Energy Bill. The group says solar power has achieved such exceptional cost reductions (70%) over the past two years that the industry is confident of being competitive with all forms of energy generation within the next decade.

STA PV specialist Ray Noble said: “Solar could readily deliver a third of the UK’s power supply, using south-facing roofs and facades alone. This technology will be massive. Furthermore solar puts the power to generate directly in the hands of millions, not the few. DECC and its Electricity Market Reform agenda now need to fully recognise the major role that solar power will play in transforming our electricity markets.

“The approach so far has been top down. Solar power means a bottom-up energy revolution and any Government serious about breaking open the electricity market to much greater consumer choice and competition should be right behind us.”

The STA wants to see a dedicated solar power strategy. Noble added: “If the UK can have a gas strategy it must have a solar power strategy. That strategy should focus on removing unfair barriers to solar power, such as obstacles to grid access. It should also set out a pathway to grid parity to empower millions of people to take control of their energy bills.”

STA CEO Paul Barwell said: “Solar has a major role to play in transforming our electricity market so we need to see the uncertainty for the non-domestic sectors of the solar industry resolved as quickly as possible. We also need to be confident that EMR will work for on-site generators and independent generators from 2017.”

Dr Tim Fox, Head of Energy and Environment at the Institution of Mechanical Engineers said: “The publication of this new bill is good news for engineers, investors and the general public as it means we are a significant step closer to getting on with the job of building the major infrastructure projects needed to keep our homes warm, the lights on and industry working.

“With a looming energy gap for 2015, creating a stable regulatory framework for the energy sector is absolutely crucial for investor confidence and we look forward to the announcement next year on the details of the incentives, without further delays.

“The fact that energy intensive industries will be exempt from the additional costs to encourage investment in low carbon power is also positive, as it means UK industry won’t be placed at an unfair disadvantage when competing in international markets selling products such as steel.”

Alistair Smith, Chair of the Institution of Mechanical Engineers’ Power Division added: “Although the majority of measures being announced today are positive, and should enable us to meet our 2020 EU renewables obligation, the lack of an emissions target for 2030 leads to longer term uncertainty on clean energy investments.

"In the absence of this clear target we will likely see a ‘dash for (unabated) gas’ and it effectively removes any legislative incentive to develop Carbon and Capture and Storage technology for gas-fired powered stations in the medium-term.

“What is clear is that whatever technologies the UK ends up relying on to meet energy demand, energy prices are set to rise. The UK has enjoyed 20 years of cheap energy which has lead to complacent energy use. People must adjust to the fact that if they want to keep energy costs down they must adjust their behaviour.”

The UK Green Building Council also welcomed the proposals on energy efficiency published by Government today alongside the Energy Bill, which outline plans to reward firms and households that cut their energy use.

It claims energy efficiency has traditionally been the ‘Cinderella’ of the energy debate, never given the prominence it deserves in an agenda dominated by the issue of energy generation. With the publication of these new documents, that looks set to change and UK-GBC is encouraged by the acknowledgement from Government that widespread reduction of energy demand is the only way we will be able to "keep the lights on".

Paul King, CEO at UK-GBC Green Building Council commented: “After some major setbacks for its ‘Greenest Government Ever’ claims, today’s announcements are much more encouraging than many – including ourselves – have been expecting. It’s great to see Government bringing forward innovative proposals to reduce energy demand, but of course, it will be critical that they learn lessons from the Feed-In Tariffs debacle and the Carbon Reduction Commitment to ensure that this is done in the right way and provides the certainty industry needs to invest.

“Just as we need to encourage consumers and providers to make the most of the Green Deal, we need to rally behind the Government’s efforts to reduce businesses’ energy demand too. Research from McKinsey cited by DECC suggests that a 26% reduction in energy use is possible by 2030 and we need to see this as a realistic target to cut demand, save money and carbon as well as helping us keep the lights on.”

John Walker, National Chairman, Federation of Small Businesses, said: “While we welcome the much needed certainty the Energy Bill will give to investors to help secure the UK’s energy supply, we are concerned that small firms will be left exposed to ever increasing energy bills.

"The remorseless rise in energy costs is hurting not only individual businesses but also the competitiveness of the UK as a whole. Our research shows that utilities are the main cause of rising business costs for 45 per cent of small firms. What we really need is reform of the electricity market and investment in low carbon energy infrastructure to go hand in hand with radical changes in the retail energy markets.

"This would deliver tighter regulation of the big six energy companies and put in place stronger safeguards for both household and small business consumers.”

And Mark Kenber, CEO of The Climate Group, commented: "An energy policy fit for purpose in the 21st century needs to address energy security, affordability and decarbonization.

"To address these it must ensure a radically increased clean energy supply and increased energy efficiency.

"The Energy Bill does a fair amount of the first but very little on the latter.
While it shields firms from higher energy costs it does very little to shield households from higher energy bills and reduce fuel poverty.

"It is important to bear in mind that it is not the increase in cost of energy per unit, but the total bill that households actually pay, which is the critical thing.

"Scaling up energy efficiency measures – things like better insulation, low energy lighting and smarter appliances can have a massive difference to families’ energy bills. Done right, these kinds of measures can lead to lower bills at the same time that energy prices are rising.

"The Government truly needs to be pushing forward on energy efficiency and clean energy systems. The solutions are there. Energy efficiency consultations should be a key part of the Energy Bill and not an afterthought.”

Angela Knight, Chief Executive of Energy UK, said: “This Energy Bill is a big and positive step forward. In its detail it must provide sufficient clarity and confidence for investors over the direction the UK is taking on energy policy. The capacity market proposals will mean that gas power stations will be there, not just to keep the lights on while the new nuclear power stations and renewables are being built, but also for the longer term future.

"This means that the huge investment will now start being made in our energy infrastructure and this will create jobs and help economic recovery. At the same time, a focus on affordability for households and for businesses of all sizes, now and during these changes, is essential.

"The energy industry will be doing its part in both providing free and subsidised insulation and particularly assisting the elderly and vulnerable. We will be working closely with consumer groups, business groups and those who are big energy users as the bill goes through its processes, as well as Government, all political parties and the regulator.”

Niall Stuart, Chief Executive of Scottish Renewables, said in reaction: “It is a long time since a UK Bill was introduced that will have such important consequences for Scotland, given the importance of renewable energy to our economy – today and in the future.

“There is still a huge amount of detail to be agreed but today’s announcement puts in place the resources required for the UK to hit its 30 per cent renewable electricity target by 2020 – and for Scotland to meet its 100 per cent target. As such, it is an important milestone on the way to a more sustainable energy mix for the country.

“We have always said the Electricity Market Reform could ‘make or break’ the industry, but after two years of uncertainty we finally have the main parts of the framework in place to secure the investment required to grab the significant opportunities that lie ahead for us.

He added: “The need for this Bill is simple: the cheapest forms of electricity generation today are the most polluting and the main source of the UK’s climate change emissions. Unless government intervenes to ensure the building of more renewables we will end up not just with higher bills as a result of rising gas prices, we will also end up with ever-rising carbon emissions.

“DECC has said clearly that the package of measures will mean keeping energy bills lower than they otherwise would be if we continued to rely on the current energy mix.

“Scottish Renewables will continue to work with DECC officials to make sure that the Bill meets its objectives for important technologies to Scotland’s economic ambitions, including offshore wind, biomass, hydro and wave and tidal,” Mr Stuart concluded.

The Government announced their intention to protect energy intensive businesses from the cost impact of the Contracts for Difference scheme. Martin Chitty Energy Analysis Manager at the Professional Cost Management Group (PCMG) welcomed the announcement, and said: “Businesses with energy as a significant percentage of their cost base are trading in volatile energy markets where unpredictable price shifts can cause price spikes significantly impacting their margins.

"They are also contending with rapidly rising electricity network charges that are only expected to increase further as the UK’s ageing infrastructure is replaced to support renewable generation.

“Exempting energy intensive industries from the costs of the Contracts for Difference regime will help these businesses to remain competitive in the UK. This is essential as industries such as steel manufacturing will play a key role in the recovery from recession and the development of the physical infrastructure that will actually build the low carbon economy.”

Whilst energy intensive businesses will be exempt from the scheme, this will have a knock-on effect on consumers and non-energy intensive businesses. Martin Chitty continued: “This will be a bitter pill to swallow for consumers and non-energy intensive businesses, who will feel the impact in the form of an increased cost for the CfD regime.

"These businesses will also be hit by the full extent of the Carbon Floor Price and rising network charges, as well as the potential for volatile markets.

“It is going to become even more important than ever for businesses to manage their energy costs by reducing energy consumption and adopting focused energy purchasing policies.“
“With rising network charges it is possible that the non-commodity elements of electricity costs such as distribution, transmission and green taxes could collectively match the cost of energy itself.”

“Businesses are going to have to re-shape their approaches to energy purchasing to take a 360 degree view of all these different components, rather than purely focusing on the wholesale energy price. By focusing in on infrastructure charges, for example, businesses could find they are able to reduce their costs by investigating different tariffs, rooting out charging errors and taking advantage of demand management schemes.”





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