GLOBE-Net, May 31, 2012 (EurActiv) - The
biggest reforms to the UK energy sector in two decades were
announced last week prompting warnings from consumer groups and
green campaigners that they would raise bills and penalize
renewable energy and boost reliance on nuclear
The sweeping reforms, detailed in the draft energy bill, grant the government powers
to intervene in the market on a scale not seen since the industry
Under the changes, low-carbon generators including nuclear
companies will receive a fixed price for their energy that should
be higher than they can sell it for on the open market, and
ministers will create a "capacity market" to ensure a reliable
supply of power and prevent blackouts.
There will be a minimum price for carbon dioxide emissions, and
an emissions performance standard that will in effect stop
any coal-fired power stations being built without technology
to capture carbon.
The reforms will mean major changes to
the way the market is regulated, and the
way utilities and their smaller rivals
Davey, the secretary of state for energy and climate
change, said the reforms would help to bring forward the estimated
£110bn in private-sector investment that will be needed for new
low-carbon energy capacity, and that they could generate as many as
250,000 new jobs.
"Leaving the electricity market as it is would not be in the
national interest," Davey said, noting that a fifth of the UK's
current ageing power stations are likely to come out of service by
2020. "If we don't secure investment in our energy infrastructure,
we could see the lights going out, consumers hit by spiraling
energy prices and dangerous climate change. These reforms will
ensure we can keep the lights on, bills down and the air
Davey said the government's analysis showed that the reforms
would ensure that consumers' energy bills would rise by
less than they would otherwise over the next 20 years.
Charles Hendry, the minister of state for energy, said the
government had to intervene:
"The market did a good job keeping down [energy] prices to the
lowest in Europe, but it did not bring forward enough new
investment. If we are going to keep the lights on in an affordable
way, this is not a luxury - it's absolutely essential."
But there was widespread concern about some of the most
Maria Wardrobe, director of external affairs at the fuel poverty charity
National Energy Action, said: "The government can do little to
disguise that these proposals will add substantially to already
soaring energy bills and place much more risk on domestic energy
She called for VAT revenues from fuel to be recycled into
energy-efficiency programs to lift vulnerable people out
of fuel poverty.
Richard Lloyd, executive director of Which?, said: "We want to
see more evidence and the small print before we can judge whether
this will work for all of us who are expected to foot the
George Monbiot, a noted author and commentator on British energy
policy writing in the Guardian, described the energy bill as a
sleight of hand. (See Britain's climate change policy is going up in
Green groups and some renewable energy companies also attacked
the draft bill, accusing ministers of breaking promises not to
subsidize nuclear power, because the "contracts for difference" by
which low-carbon power generators will be guaranteed a price for
their electricity will favor the nuclear industry. Davey denied the
charge, and said the plans would encourage all forms of low-carbon
generation, helping the UK to meet its climate-change targets.
By giving generators a fixed price guaranteed in advance for
their power, the "contracts for difference" system should offset
the risks taken by renewable and nuclear developers, which have to
shoulder high upfront costs before they can start reaping the
returns from their investment, he noted. If the market price turns
out higher than the "strike price" agreed in advance, there will be
arrangements to claw back some of the difference.
However, many of the details on how some of the reforms will
work have yet to be set out. For instance, the "strike price" for
the first round of contracts for difference will not be set until
2013, and a "delivery plan" for implementing them will come into
force in mid-2014.