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The UK Energy Bill - More questions than answers?


European Leiglation on Carbon Emissions is forcing the closure of coal-fired power stations in the UK. This in turn is forcing the government to increase sustainable energy production

Not before time, the conservatives have provided some detail on the eagerly-awaited Energy Bill - it is basic plan for generating electricity in the UK for the nexy thirty years or so. At least that was supposed to be the plan. Sadly it has fallen very, very short of the mark. Just what will be the impact on UK business?

Why have the Conservatives introduced this legislation?

Many reasons, but fundamentally it boils down to ensuring the UK has a secure and affordable energy supply.

To meet European laws on ancient and dangerously polluting power stations, and of course to help meet the statutory carbon emissions targets, the government is being forced to close some of the UK's biggest coal-fired plants in the next five years. A number of old nuclear power plants are also due to close in the 2020s. End result is the Energy Gap - a massive difference between the power at our disposal and the anticipated demand for electricity for years to come.

To meet its emissions reduction and renewable energy targets, the government needs to increase the amount of energy produced by wind and nuclear power, in particular, but also other forms of clean energy such as biomass. It also wants the UK to be more self-sufficient for its energy, so it doesn't have to rely on other countries to supply our power and is less dependent on volatile and increasingly expensive global gas and oil prices.

This, of course, is a VERY expensive process.

So, the government has told energy companies that, by 2020, they can add a total of £7.6bn to household bills to help pay for all the new power plants, windfarms etc. This, coincidently, is about the same amount as the UK currently spends on importing gas. By allowing energy providers to charge more, the government hopes they will have the confidence to invest heavily in clean power. Without that certainty, energy companies would, understandably, be unwilling to invest such vast sums of money.

The principal Government Energy Targets are:

  • To produce 30% of electricity from renewable sources by 2020
  • To cut greenhouse gas emissions by 50% on 1990 levels by 2025
  • To cut greenhouse gas emissions by 80% on 1990 levels by 2050

The impact on the UK population is that their energy costs will soar.

The government's own figures show that energy companies currently charge about £20 extra per year to help pay for clean energy projects. This, it says, will rise to £95 in 2020. Others think it will be slightly more. The advisory body Committee on Climate Change says bills will go up by £110, although this figure does include £10 for energy efficiency measures.

What happens if no action is taken?

This is the fundamental question. The government says that all of its energy policies will reduce bills by £94 a year on average by 2020. Energy efficiency will mean we'll use less and we'll be less reliant on gas - so bills will not be as high as they would otherwise have been, it claims. Soaring gas prices added about £100 to the average bill between March last year and March this year, according to regulator Ofgem. The International Energy Agency has forecast natural gas prices to rise by 40% by 2020, even with an influx of cheap shale gas.

The Committee on Climate Change agrees that bills would be higher without significant investment in clean energy. It is possible, therefore, that the Energy Bill, together with other measures to reduce carbon emissions, will actually save you money in the long run. Older nuclear plants will be decommissioned and replaced by new nuclear capacity.

Might the lights get turned out?

There is the vital question of whether power companies are prepared to invest the huge sums of money needed to build additional power plants. Some pundits have already suggested the Energy Bill does not go far enough and does not provide the long-term certainty that is a pre-requisite for substantial investment in the Energy producrtion infrastructure.

Ultimately, though, it is very unlikely that the government would let the lights go out - political suicide and ecenomic disaster being the two obvious consequences.. Shouild investment fall short and not enough clean energy capacity is provided, it will have to resort to short-term measures, such as simply importing more energy from overseas, the current very scary figure is 43% - do we really want this to rise and become even more dependent from sources of energy which are imported from abroad? Hmmmmm?

Posted on

Friday, February 14, 2014

Updated on

Friday, February 14, 2014

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