Industry reaction to the Energy Bill

Early response to today's Energy Bill has been mostly positive, however Greenpeace has criticised the government for not making the 2030 decarbonisation target mandatory.

Joss Garman, political director at Greenpeace, said: “There is a gaping hole in the Energy Bill in the shape of a 2030 decarbonisation target. Billions of pounds of investment rest on this target being made law. Without it, there is serious risk of an investment vacuum after 2020, and of jobs and money being lost to our economic rivals.”

He went on to say that Greenpeace planned to work closely with MPs across all parties to push for an amendment that would offer low-carbon investors certainty through to 2030.

Angela Knight, chief executive of Energy UK, said the Bill was a positive step forward but she wanted more detail so that investors would have clarity and confidence about the direction the UK was taking on energy policy.

“The capacity market proposals will mean that gas power stations will be there, not just to keep the lights on while the new nuclear power stations and renewables are being built, but also for the longer term future,” Knight said.

“This means that a huge investment will now start being made in our energy infrastructure and this will create jobs and help economic recovery. At the same time, a focus on affordability for households and for businesses of all sizes, now and during these changes, is essential.”

The Renewable Energy Association (REA) said the Bill could benefit both consumers and green generators. Gaynor Hartnell REA’s chief executive, said: “If the new regime is implemented sensitively, consumers and green generators should both win.

“Electricity customers will only pay what is necessary to move the UK towards a more sustainable and secure energy future. That’s because, with these new contracts, if the price of electricity increases, the amount of subsidy required can fall. Generators should get a stable price, provided they achieve the fair market price for their electricity. That’s why it’s essential we have a route to market that guarantees this.”

The nuclear industry welcomed the Bill. Keith Parker, chief executive of the Nuclear Industry Association, said: “The Bill provides much-needed investment certainty. A major nuclear new-build programme will lead to substantial industrial and employment benefits – including considerable opportunities for the UK nuclear supply chain and a boost for UK manufacturing and construction.”

Parker’s thoughts were echoed by the carbon capture and storage industry. Jeff Chapman, chief executive of the Carbon Capture and Storage Association, said: “The publication of this Bill will give a good deal more confidence to those businesses that are developing the UK’s first CCS projects and laying the foundation of a world leading industry.”

David Smith, chief executive of the Energy Networks Association, said: “The Energy Bill is long awaited and the certainty it must deliver has been in demand from the energy industry, manufacturers and investors for too long. Now that we have reached this stage, we hope that principles rather than politics will aid rather than hinder its progress.

“If we are to ensure a sensible and achievable low-carbon transition, it will require certainty for the energy mix that encourages global investment and enables the effective delivery of smarter networks technologies.”

Commenting on the Bill, Tony Cocker, chief executive of Eon UK, said: “Each detailed proposal must now be checked to ensure that it meets our trilemma test. Is it fair to consumers? Will it help keep the lights on? Is it part of decarbonising the UK? Given that family finances are being squeezed more than ever at the current time, we must all ensure that UK consumers are at the heart of these reforms and that they do not have to bear any more costs that cannot easily be justified, like the carbon price floor, which is due to hit electricity prices next year.”

Consumer Focus expressed concern that the government’s proposal to reduce energy demand may come at a cost to consumers. Audrey Gallacher, director of energy said: “Demand and energy efficiency measures must be a cornerstone of energy policy to counter rising energy prices for customers. The government’s commitment to reduce energy demand through incentives for consumers and businesses is welcome. But it will come at a cost – which again will be passed on to customers.”

Mike Pigott, UK power sector director at management consultancy firm Turner & Townsend, said gas played a “surprisingly big role” in the Bill. “There’s every chance that Britain will see a second dash for gas as gas is cast as the least controversial, quickest to build and most reliable stop-gap source of power,” Pigott said.

“New nuclear power stations will play a key role too, but the construction timescale they need is too long to address the immediate demand for power that gas will bridge. The Bill also recognises the ongoing role of coal-fired stations, albeit with the addition of carbon capture and storage technology.

“The hard truth is that unless they can feel confident about the future shape of the industry and the energy market, they will not invest the huge sums required to build the new generating capacity that Britain needs to keep the lights on. The contract for difference proposals should go a long way to reassure investors that they will get a solid return on their capital costs,” he said.