“Substantially higher energy prices” are the words on every news station further to the release of the draft energy bill earlier this week”.
The government published the bill with the intent of dramatic energy market reform. Secretary of State for Energy and Climate Change Ed Davey said:
“The draft Bill includes measures necessary to reform the electricity market to deliver secure, clean and affordable electricity.”
One of the key objectives of the Bill is to secure a sustainable supply of energy for the UK by creating policy which will encourage £100 billion investment into nuclear plants and renewable energy.
New contracts for difference (CFDs) will give low carbon electricity generators top up payments if market prices are below an pre-agreed level. The payment is made by the supplier and when the prices go back above the pre-agreed level the generator pays the money back to the supplier.
Renewables Obligation certificates which currently form the basis of ‘above market’ payments for renewable energy generators will continue until the end of March 2017.
In addition the Bill talks about a Carbon Price Floor which will effectively be a tax on carbon emissions. The bill talks about the Office for Nuclear Regulation (ONR) and recognises that it will regulate the safety and security of the next generation of nuclear power plants.
Reactions to the Bill have been mixed with many saying it is all about funding nuclear and will result in substantially higher energy prices.
Paul Steedman, Friends of the Earth Senior Energy Campaigner said:
“The Government needs to stop obsessing over a way to make the sums for nuclear power add up, stop our homes leaking heat and switch the country from dirty gas to clean British energy from wind, sun and water to help hard-pressed households with their bills.
After 18 months of dithering, this Bill doesn’t even set out a clear purpose, when it should make a simple commitment to decarbonising our electricity supply by 2030.”
Tom Greatrex MP, Labour’s Shadow Energy Minister
“Hard pressed families and businesses across the UK are being squeezed by record energy prices, whilst the Big Six energy companies rake in billions in profits.
“The public deserves an energy market that delivers fair prices and works in their interests. Unless the Draft Energy Bill gets to grips with spiralling fuel costs, people will be right to think that this Government is completely out of touch with families and pensioners struggling to make ends meet.”
A key hole in the bill is the prices for CFD. In August last year Vestas told the BBC that it could not invest in its new turbine factory on the Isle of Sheppey until a contract for difference price is published. The government has still not published this price for any of the ‘low carbon’ technologies.