Low-carbon incentives for the energy industry

The UK government will guarantee electricity prices in order to encourage the private sector to invest in low-carbon energy.

Chris Huhne, the Secretary of State for Energy and Climate Change, announced the proposals as part of a package of measures designed to ensure the UK has the energy generating capacity it needs whilst sticking to climate change targets.

"It is time to get off the fossil fuel hook and on to clean, green electricity," Mr Huhne wrote in today's Telegraph.

Within the next decade a quarter of the UK's generating capacity is due to come off line. Around half is due to tightening environmental regulation, although many of Britain's ageing power plants are due for closure.

"We've got to replace about a quarter of our ageing coal and nuclear power stations anyway, and since energy companies are not the Salvation Army and are going to have to make a return if they are going to make this investment, there is going to be a rise in energy bills," said Huhne.

For firms generating low-carbon energy, the government proposed a feed-in tariff with long contracts, giving investors a guaranteed price for their electricity. "This would ensure an active and liquid wholesale market and provide new investors with enough certainty to enter the market. The investor building plant at the lowest cost could win the contract, ensuring the consumer and the taxpayer pay the lowest possible price for low carbon electricity," Huhne said.

Huhne said the new framework would provide certainty that would "remove the risks of being buffeted by oil and gas [price] shocks". He added that this would ensure consumers get the best possible deal by encouraging more competition into the marketplace.

The government is offering incentives for private investors to enable them to build a new generation of power plants using low-carbon technology, such a nuclear and renewable energy; however there will be no support for the nuclear industry.

"…there will need to be extra support for young technologies such as offshore wind, wave and tidal stream…However, there is no justification for paying extra support to nuclear, which is a mature technology," Huhne was quoted as saying in an article in the Telegraph.

Price comparison website uSwitch has claimed that implementation of the measures will see bills increase by £500 a year, reports which Mr Huhne has denied. Mr Huhne said that the average electricity bill would rise by £160 per year over the next 20 years, and that bills would rise by £190 a year if the new measures were not put in place.

Green campaigners were by and large welcoming of the news. In a statement, Friends of the Earth described the reforms as a once-in-a-generation opportunity to set an energy policy for the next 20 years, adding that "it's crucial the government makes the right decisions to ensure renewable power thrives instead of locking us into a dangerous high-carbon world."

Author: Leroy Robinson | Climate Action

Image: David Spender | Flickr