Government reveals plans to reform UK's energy landscape
Share
The government has announced its plans to reform the UK’s energy landscape in what has been billed as the ‘biggest shake-up of the market since privatisation’.
At the heart of yesterday’s white paper is a drive to encourage investment in new low-carbon energy production; a need to bolster the UK’s creaking energy infrastructure; and an attempt to stabilise prices for consumers with a more secure energy future.
To achieve this, the Department of Energy and Climate Change (DECC) has set out four partially overlapping — and, some have argued, overly complex — measures, which take effect in 2013.
‘…some time in the middle of this decade, renewables, and particularly wind, will be producing more electricity than nuclear’
Gordon Edge, RenewableUK
The Carbon Price Floor, first announced in the Budget in 2011, ensures a minimum price for carbon emissions permits for fossil-fuel plants.
At the moment, companies have to buy carbon allowances to cover every tonne of emissions they produce, but depending on market forces this can dip to quite low unit levels. Having a floor price is supposed to prevent this and, in theory, reward those who invest in clean energy.
The introduction of new long-term contracts — contracts for difference (CfDs) — guarantees low-carbon energy generators a fixed, higher-than-market-value price for their electricity.
Meanwhile, an emissions performance standard (EPS) has been set at 450g of CO2 per kilowatt hour to reinforce the requirement that no new coal-fired power stations are built without carbon capture and storage (CCS) but also to ensure that necessary investment in gas can take place. Finally, a capacity mechanism ensures the future security of electricity supply to ‘keep the lights on’.
Favouritism
The plans are largely seen as favouring new nuclear build, giving more confidence and certainty to the big players such as EDF and RWE npower that have plans for new build at various stages. What is less clear is how other low-carbon industries will fare.
‘The white paper may throw a few crumbs of comfort to the renewables industry, but in reality it is all about getting new nuclear power stations built,’ said Catherine Mitchell, professor of energy policy at Exeter University.
At a roundtable event of green investors hosted today by Triodos Renewables, Gordon Edge, policy director at trade body RenewableUK, said the announcement was a mixed bag for the industry.
‘I think yesterday’s white paper underlines the government’s commitment to the EU target of 15 per cent of energy overall and 30 per cent of electricity from renewable [of total energy/electricity mix].
‘That means that, some time in the middle of this decade, renewables, and particularly wind, will be producing more electricity than nuclear and will continue to do so for the foreseeable future — so why all this focus on nuclear? We’re the ones who will actually be giving you more electricity, so why are we being sidelined? But it’s not a terrible package overall; we’ve got a half result.’
He told The Engineer that the key concern for the renewables industry with regards to CfDs was how the contracts would actually be awarded through the proposed auction system.
‘What that does is deeply inhibit investment in the development phase, because if you have a project coming out of development and you don’t know if it’s going to win the competition to get a contract and at what price, then you think twice about investing in that project,’ said Edge.
Renewables output
In the midst of all the furore surrounding the white paper, the panel of investors noted a report released yesterday by REN 21 showing that renewable energy supplied an estimated 16 per cent of total energy usage and 20 per cent of electricity generated globally in 2010 — a jump of 32 per cent from 2009.
‘The UK has come so late to the party and I really hope we’re at a point now where we are going to play catch-up very rapidly, because as an investor in large-quoted companies we don’t see many opportunities in the UK generally,’ said Clare Brook, fund manger at WHEB Asset Management.
Readers' comments (7)
Andy Hutt, CEO, triOpsis | 14 Jul 2011 11:19 am
Committing to a £110 billion programme is risky in any industry. However, when you add in that consumers energy costs will have to go up in the short term for them to come down in the long term, then you realise just how hazardous a venture the government’s energy generation investment is. It’s true that the UK’s energy infrastructure is aging and a move towards renewable energy is required. The execution of this ambitious programme therefore has to be nothing less than clinical, or errors will happen, delays will occur and even more costs will accrue. This will not go down well with a public who has seen an initial hike in bills.
The organisations responsible for carrying this out need to ensure they have full visibility and control of their operations in order to avoid these unnecessary delays on site. The good news is that a sophisticated approach to the use of mobile photography can provide substantial benefits to a process such as this. Construction teams, fitters and gangs can now quickly photograph any issue they may encounter, and have it automatically uploaded, with contextual information, to a website. This brings visual intelligence to Head Office, so they can quickly decide on the best course of action and avoid the all-too-common aborting of jobs. It brings a level of control and has a significant impact on the level of quality of work. If this programme is to succeed, and not bring further expense to the British public, these are the kinds of issues that need to be addressed now.
Andy Hutt, CEO, www.triopsis.com
Unsuitable or offensive? Report this comment
Barrie J Yates | 18 Jul 2011 6:24 pm
Oh no! yet again we are pestered with the wind generation lobby. Can't somebody do the maths and see that wind is a complete waste of money. Without subsidies wind farms would not be built. Also why do our leaders not understand that wind does not blow all the time, therefore needing expensive back up systems. Nuclear is the best way forward, and the money wasted on foreign wars would have paid for a new fleet of stations. I only hope that we are still in time to prevent blackouts, and a bit of research into what happened in the USA in 1965 and 2003 when the Electricity supply failed will show we really do need to extract our digits to preserve our power supplies.
Unsuitable or offensive? Report this comment
A W Black | 20 Jul 2011 8:40 pm
Nuclear is the most expensive energy generation technology. The long term decommissioning and storage expenses are astronomic. Nuclear is not the answer.
We should have wind, but only some wind.
Wave is also intermittent.
Tidal is predictable. We (UK inc) should be investing in tidal power, lots of tidal power.
Unsuitable or offensive? Report this comment
A W Black | 20 Jul 2011 8:40 pm
Nuclear is the most expensive energy generation technology. The long term decommissioning and storage expenses are astronomic. Nuclear is not the answer.
We should have wind, but only some wind.
Wave is also intermittent.
Tidal is predictable. We (UK inc) should be investing in tidal power, lots of tidal power.
Unsuitable or offensive? Report this comment
Brian Tucker | 30 Jul 2011 8:22 pm
I agree with A W Black, Tidal is the only dependable natural energy and we should be using it as much as possible. Bring back the Severn Barrage. Properly designed that is.
Unsuitable or offensive? Report this comment
Andy Millard | 13 Oct 2011 8:15 am
Of course we need to develope renewable energy options but in my experience Joe Public imagines a few wind turbines would be suffient to replace a conventional fossil fuel power station. In reality a hundred or so would be required to replace even one conventional generating unit. In my opinion the drive towards a new generation of Nuclear power plants must be maintained.
Unsuitable or offensive? Report this comment
Peter T | 23 May 2012 5:20 pm
Yet again Fusion is ignored, yes it has been a long time coming, but listening to a program about it on R4 some weeks ago, it came out that the world wide spend on fusion research since it started amounts to the same amount that the Afghan war costs over 50ish days, Yes it has been promised in 20 years for at least 40 years but it is amazing how far we have got with these tiny amounts of investment. I think it is time for not only international co-operation, which we have, but time to spend some serious money for a decade or so to see if it can be commercially viable, if it does not work then at least we would know, governments waste money all over the place already so a few more billion ultimately would not matter in the face of the benefits
Unsuitable or offensive? Report this comment