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The Energy Bill and what it might mean for your energy bill

09 May 2012

With a quarter of the UK’s electricity generating capacity shutting down over the next ten years, as old coal and nuclear power stations reach the end of their lives and are taken offline, the government estimates that more than £110bn will be needed to build the equivalent of 20 large power stations and make necessary upgrades to the electricity distribution grid.

Set against this, electricity demand is set to double, with increasing electrification of transport and domestic heating.

In July last year, the government responded to the challenges thrown up by these stark statistics by publishing a white paper that set out measures to attract investment, reduce the impact on consumer bills and create a secure mix of electricity sources, including gas, new nuclear, renewables, and carbon capture and storage. Publication heralded the first stage of the long-awaited electricity market reform process, which last week came that little bit closer when it was confirmed in the Queen’s Speech that the Energy Bill, foreshadowed in the white paper, will be set before parliament in the coming session.

The government is aiming to legislate for the key elements of the reform process in the second session of the current parliament, and seeks to see legislation reaching the statute book by the end of the next session (Spring 2013). This will mean that the first low-carbon projects will gain support under its provisions by around 2014.

Colin Brown, director of engineering at the Institution of Mechanical Engineers, welcomed the Bill's announcement but thought it long overdue. "With the UK’s nuclear programme in disarray, wind power under increasing pressure and uncertainty over feed-in tariffs squeezing the UK solar industry, electricity market reform is the government’s best chance to ensure a secure, clean and affordable energy supply in the coming decades," says Dr Brown, adding: "They need to get it right and they need to get it done.”

He thinks the warm words about re-balancing the economy in the introduction to the Queen’s Speech are not matched by any significant legislation to help UK manufacturing. "Our manufacturers and engineers are crying out for an industrial strategy backed by strong legislation that can support their efforts to drive the economy back towards growth. This speech has not delivered it.”

Energy reform was also one of two aspects of the Speech that caught CBI director-general, John Cridland’s attention; the other was regulatory reform. "The first should help, but the jury’s out on the second,” he said. “Let’s be clear, electricity market reform is about keeping the lights on. Business investment in low-carbon will only happen when the detailed market framework is in place. Today’s announcements are an important stepping stone.”

Gaynor Hartnell, chief executive of the Renewable Energy Association looks forward to poring over the details of the proposed Energy Bill. "This is of immense importance to project developers in renewables, as the measures it puts in place will eventually replace the Renewables Obligation," she said. "Many of the projects in development now are working to a time scale that takes them into the new regime, and they need to know the detail as soon as possible. The new arrangements aim to deliver a stable price for renewable electricity generators, irrespective of what happens to electricity prices. If all works as intended, it should make project development less risky and means that the public pays no more than it needs to for green power.”

Which? executive director, Richard Lloyd believes the Energy Bill must put consumers first. "We recognise that mechanisms to encourage investment in low carbon electricity generation are necessary, but the cost to the consumer should be the government's overriding concern when they are negotiating contracts," he said. "Badly designed policies like the Carbon Price Floor, the Green Deal and the smart meter roll-out could cost the consumer billions, it is imperative that this is not allowed to happen with electricity market reform. People tell us rising energy costs are their biggest financial worry so the government should also take the opportunity to reform energy tariffs and make them simple and fair.'

Speaking to energy ministers from 23 leading economies last month, prime minister David Cameron paid tribute to the UK's renewable energy sector, which he claimed contributed almost 10 per cent of our total electricity needs last year. According to Mr Cameron, the UK has added more capacity for renewables in the last two years than at any time in the last decade. “Our commitment and investment in renewable energy has helped to make renewable energy possible," he said. "Now we have a different challenge. We need to make it financially sustainable.”

What with the solar feed-in tariff debacle of last year and its very negative impact on an otherwise thriving sector of the renewables industry, that platitude might ring somewhat hollow.

Les Hunt

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