Energy White Paper

27.02.03 Share

 

If you want the bottom line on the Energy White Paper, without the spin, read on. The Government's new energy policy is big on ambition but light on substance. This note summarises the facts and highlights what future developments to look out for.

The Principles

Launching the long-awaited and oft-delayed Energy White Paper, the Government has put climate control ahead of security of supply (or energy reliability as the Government now prefers to call it) for the first time by declaring that the country's energy needs will increasingly be met by a mix of renewable power and imported gas.

The Government sees investment in energy efficiency and increased generation from renewables as the best means by which to achieve its aim to reduce carbon dioxide emissions. Energy efficiency will lead to less demand, which will lead to fewer emissions. Less demand will also improve energy reliability. Generating energy from 'greener' sources will again lead to fewer emissions and will also maintain energy reliability through energy diversity.

The Government recognises that there will be a cost involved in moving away from traditional energy sources but believes that inaction now will lead to higher costs in the future. The Government accepts that a proportion of this cost will be borne by consumers, who the Government expects to experience price rises.

However, the Government expects that these price rises will be offset by lower consumption (achieved through energy efficiency) and that the impact on the UK economy as a whole will be balanced by the gains to be made in becoming a world leader in these developing technologies.

The Figures

It is the Government's ambition that the UK should reduce carbon dioxide emissions by 60% by 2050.

It is the Government's aspiration that by 2020, 20% of UK electricity be generated from renewable sources.

The Government has pledged a further £60 million of capital grants for renewables projects.

The Government predicts that over the next 17 years, the increases in the current unit price paid by consumers could be as follows - electricity (household): up to 15%; electricity (industrial): up to 25%; gas (household): up to 5%; and gas (industrial): up to 30%.

The Fuel Mix

The Government has chosen to set no targets for the fuel mix, preferring instead to rely on market forces and, in particular, the impact of the EU wide emissions trading scheme.

The Government is proposing no new nuclear build but does not rule out that at some point in the future, new nuclear build may be necessary. The Government is not proposing to close existing nuclear stations prematurely. The Government reaffirmed its support for combined heat and power plants (CHP). Targets of CHP generated electricity for government departments are to be introduced. Field trials of micro-CHP are to be undertaken and a CHP strategy paper is to be published later this year.

It would appear once again that wind is central to Governmental plans. Further site allocations for offshore windfarms are to go ahead this spring, though the Government believes that the economics of offshore windfarms remain very uncertain. The Government is also to push ahead with legislation allowing windfarms beyond territorial waters.

The Government cites biomass as being crucial as it has the advantage (over wind etc) of flexibility. There will be a statutory consultation during 2003 concerning the current Renewables Obligation requirement that by 2006, 75% of the biomass in co-fired stations should be energy crops. The recent cost savings associated with solar PV technology have prompted the Government to explore whether generation of less than 0.5MWh a month could qualify for renewable oblication certicates (ROCs).

The Government accepts that coal and gas cannot be forgotten, but believes the future of coal in particular must lie in cleaner coal technologies. There is also a suggestion that (subject to EU approval) generation from coal mine methane may be given CCL exemption.

Other main points

  • The Government will work with OFGEM to ensure NETA offers a level playing field for small generators (including CHP and renewables).
  • The Office of the Deputy Prime Minister will shortly publish new planning guidance on renewables. The Government will also emphasise the benefits of renewables projects in planning guidance and will work to obtain more transparency on why projects are rejected.
  • OFGEM is committed to publishing the detail of a new incentives framework for the connection of distributed generation later this year. OFGEM is also discussing upgrades to the transmission network.
  • The Government will work with OFGEM to provide incentives for energy companies to help customers improve energy efficiency. This may even include revisiting the right of homeowners to change gas and electricity suppliers with 28 days' notice (though this would seem unlikely).
  • The Government is to set up an agency to promote hydrogen fuel cell technology.

Comment

The Government has shown that it is aware of most of the major issues facing the UK energy markets but it has yet to set out in detail exactly how its aims will be met.

Subsidies, the pledge of capital funds and clear targets linked to Government commitments are the kind of substantive steps many in the industry were hoping for, rather than the aspirations and big picture thinking the White Paper contains.

However, the Government has pledged to issue frequent future updates on its energy policy so the Energy White Paper should be very much the beginning of the Government's initiatives on energy.

Key Contact

Derek Goodban, partner, +44 (0)121 685 2710, derek_goodban@wragge.com

This alert may contain information of general interest about current legal issues, but does not give legal advice.

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