16 May 2011 | Tierney Smith
Carbon, Climate Change, Construction, Energy, Finance/insurance, Legislation, Europe

 

MPs have called for an overhaul of the Electricity Market Reform (EMR), and on the Department for Energy and Climate Change (DECC) to be honest about the financial support for the nuclear industry.

The Energy and Climate Change Committee calls for a more straightforward and coherent electricity market reform, which will set out explicit decarbonisation goals for 2030, deal with the problems of intermittency and minimises the costs for consumers. The also call for the end to the dominance of the Big Six energy companies.

Their report, published today said: “The proposals presented in the consultation are over complex, potentially expensive and fail to recognise the urgency of the transformation that needs to take place.”

It also said the planned reforms by the government would not provide the £110 billion in investment which is needed to make sure the UK is at the forefront of competition.

They also raised major concerns that the new EMR would go back on promises made that no public subsidy would be given to nuclear; finding many areas where nuclear would receive a windfall under the proposals.

The DECC has proposed a subsidy for low-carbon generation in the form of Feed-In-Tariffs with a Contract for Difference (CfD) where repayments are made to ‘top up’ the difference between the average market price and the agreed price.

The committee warned that this approach would be the best option for nuclear generation and biomass production but would not be the best choice for all low-carbon technologies. The committee urges the government not to go down the path of CfD for all low-carbon generation for this reason.

They urge the government to use the upcoming EMR White Paper to address the advantages, risks and challenges of new nuclear head-on and honestly.

Tim Yeo, Chair of the Committee said: “Ministers believe that new nuclear could pay a key role in keeping the lights on and meeting our climate change targets – but they don’t want to own up to supporting it.”

“This is understandable given the promise they made not to subsidise nuclear, but it would be deeply irresponsible to skew the whole process of EMR simply to save face. The government must be up front about the support it is giving to nuclear and not hide subsidies.”

The committee said the starting point of the EMR should be a clearly defined objective to reduce carbon intensity of electricity generation to 50g of CO2 per kilowatt hour (kWh) by 2030, inline with the recommendations of the independent advisory body the Committee on Climate Change, in their 4th annual Carbon Budget.

This halves the current pledge by the government which has a target of 100g CO2/kWh – which would be too high to meet emissions reductions targets of 80 per cent by 2050, says the report.

In order to do this, the report said the government needed to make major changes to their current proposal. They hope to see a development of the wholesale market which would break up the dominance of the Big Six energy companies and allow new entrants to invest in the UK, improving the liquidity of the market.

They also said the government should explore how a connection with European markets would affect the EMR package.

The committee also acknowledge that affordable electricity in the short term will not be the primary driver of energy policy, which should instead be to develop greener and more secure sources. They said the government would need to tackle this and offer support to the most vulnerable energy customers.

And while accepting the Carbon Floor Support, they acknowledged this would increase costs for customers while providing a potential windfall for nuclear and renewable generators. They also questioned the introduction of a Carbon Floor Price agreed under the budget in March, which they said may have been best left till after the EMR was finalised.

Yeo said: “The government must go back to the drawing board and come up with a more straightforward and coherent set of plans to reform the electricity market. Radical reform of the wholesale market is needed, but at the moment Minister are only tinkering at the margins.”

 

Image: Blatant World | flickr

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