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Concern over Energy Bill effectiveness

The Government’s draft Energy Bill could impose unnecessary costs on consumers, lead to less competition and deter investment, the Energy and Climate Change Committee have said.

The Bill will introduce a system of long-term contracts to give power companies a guaranteed price for the low-carbon electricity they produce.

This move is intended to reduce the risk on investment in projects with high up-front capital costs. such as nuclear reactors and offshore wind farms.

The committee is concerned that the new model for contracts will spread the liability across various energy companies, and this will lead to too much complexity that will be hard to enforce.

John Cridland, CBI Director-General, said: “Major energy investments are hanging on critical decisions the Government must make in the coming weeks and months. If they are to plan long-term investments, businesses need to know what the electricity market will look like in years to come.

“The Committee rightly highlights the importance of agreeing the design of the contracts for difference, and this must be done by the autumn.

“But companies are also eager to get on with investing now, and the decision on the renewables obligation support rates cannot wait any longer.”

Corin Taylor, Senior Economic Adviser at the Institute of Directors, said: “When the Draft Energy Bill was first published, we were concerned that it would fail to deliver clean, secure and affordable energy, and today’s report confirms our fears.

“As it currently stands, the Bill does not bring the clarity and certainty that investors require. This could mean a higher cost of capital and potentially higher bills. Clean and affordable replacements for our ageing coal and nuclear stations are urgently needed, and unless the Bill is substantially improved, the Government will have to go back to the drawing board.”

Tim Yeo MP, Chair of the Energy and Climate Change Committee, said: “The Government is in danger of botching its plans to boost clean energy, because the Treasury is refusing to back new contracts to deliver investment in nuclear, wind, wave and carbon capture and storage.

Tim Yeo MP added: “If the Energy Bill does not set a target to largely decarbonise the electricity sector by 2030, then the UK may miss one of the biggest opportunities it has to create a low-carbon economy in the most cost effective way.”

David Kennedy Chief Executive of Committee on Climate Change said: “We strongly agree with the recommendation that there should be a clear carbon objective for the EMR. Setting an objective in secondary legislation would guide design of the delivery plan, and ensure that this results in appropriate levels of investment in low carbon technology.

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This was posted in Bdaily's Members' News section by Tom Keighley .