Like most governments worldwide the new UK Government has a massive dilemma: i.e. how to meet published commitments for carbon reduction without the money to pay for it? The Coalition published its first Annual Energy Statement on 27 July. Energy and Climate Change Secretary Chris Huhne introduced a Statement comprising 32 Actions that build on the previous Government's Climate Change and Energy Acts and associated Regulations and initiatives, including extending the Carbon Emission Reduction Target (CERT), bringing forward the introduction of smart metering and allowing Local Authorities to sell zero carbon electricity to the grid from 18 August 2010. http://www.decc.gov.uk/assets/decc/What%20we%20do/UK%20energy%20supply/237-annual-energy-statement-2010.pdf
The Coalition's 'big idea' is the Green Deal which, as outlined by Mr Huhne, will require Energy Companies to offer households the facility to improve thermal insulation, paid for by a loan which will be repaid from the reduction in energy bills derived from the resultant lower heating running costs. Currently there is no mention of this scheme being extended to cover investment in renewable energy equipment, although the Government is 'consulting on a micro generation study' and developing a renewables delivery plan. Detailed proposals for the Renewable Heat Initiative (RHI) http://www.decc.gov.uk/en/content/cms/consultations/rhi/rhi.aspx that formed part of the 2008 Energy Act, and on which consultation closed on 26 April, will be published in the Government's Spending Review, due on 20 October 2010.
The Government wishes to encourage community renewable energy schemes and will be launching Community Energy Online this coming autumn. The bottleneck that currently slows down grid connection of renewable energy installations is being dealt with by the introduction of a key component of the Energy Act under the 'Connect and Manage' regime on 11 August.
The elements of the Government's statement that require new legislation will be enshrined in the proposed Energy Security and Green Economy Bill http://www.decc.gov.uk/en/content/cms/legislation/energy_bill/energy_bill.aspx. As well as providing a framework for the Green Deal this is also likely to include provisions for regulating carbon emissions from coal-fired power stations; reforming energy markets to deliver security of supply and ensure fair competition; establishing a framework for the development of a 'smart grid'; requiring energy companies to provide more information on bills; easing exploitation of difficult to access oil and gas reserves in the North Sea; and establishing a green investment bank.
The July Energy Statement also commits the Government to reviewing Climate Change Levy in the autumn; as well supporting the development of marine energy; urgently exploiting the potential of bio-electricity, energy from waste, biomass etc.; and confirming their commitment to launching a demonstration project for carbon capture and storage as established in the 2010 Energy Act.
The Statement maintains the previous Governments support for a nuclear energy programme based on regulatory justification of new reactor designs and generic design assessment. The Statement confirms the 2008 Energy Act's requirement for operators to budget for waste management and decommissioning.
Carbon Emission Reduction Targets, Carbon Reduction Commitments and Climate Change Agreements are all under review. The Coalition is committed to extending the CERT from the current 2011 to the end of 2012, with lifetime CO2 savings being increased from 185 million tonnes to 293 million tonnes, covering 3.5 million homes. A new Super Priority Group of low income homes will be identified, representing 15% of the spend.
The CRC Energy Efficiency Scheme grew out of the 2008 Climate Change Act and is a mandatory scheme requiring all organisations consuming more than 6,000 MWh energy per annum to report their consumption and henceforth purchase carbon allowances. On top of this all organisations that use 'half hour meters', which applies to businesses having a peak electrical load of 100 kWh or more, are required to report their energy consumption. The first reporting date was April 2010 and allowances will be sold at a fixed rate of £12/tonne CO2 from April 2011 and auctioned from April 2013 http://www.decc.gov.uk/en/content/cms/what_we_do/lc_uk/crc/crc.aspx. Revenues from the sales will be ploughed back into energy saving measures.
CRC does not apply to the energy-intensive industries already involved in Climate Change Agreements, which was introduced in 2001 and which the previous Government wanted to extend until 2017. It also doesn't apply to the installations of 20 MW or more that are signed up to the EU Emissions Trading Scheme.
Ofgem and the Government published a Prospectus for smart meters alongside the July Energy Statement, launching a consultation process that will run through to the end of October. http://www.decc.gov.uk/en/content/cms/consultations/smart_mtr_imp/smart_mtr_imp.aspx.
This foresees a comprehensive roll out of smart meters across both domestic and small non-domestic sectors with a net saving of some £7.2 billion over a 20 year period.
The Statement also includes an assessment of the likely impact of Coalition policies on average energy bills in 2010, 2015 and 2020 depending on the price of oil (currently at $77 per barrel). For a marginal increase in oil prices an increase of 1% in energy prices is predicted for 2020, whereas if oil prices double a saving of 5% is estimated, compared to what energy bills would be in the absence of the proposed policies.
In parallel with his first Energy Statement Huhne also published his Government's 2050 Pathways Analysis and Calculation Tool http://www.decc.gov.uk/en/content/cms/what_we_do/lc_uk/2050/2050.aspx. This visionary project enables interested parties to establish scenarios for achieving the UK commitment to achieve an 80% reduction in greenhouse gas emissions by 2050. I will be reviewing this project in a later blog.
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