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Government "misses opportunity" to clarify decarbonisation plans as Energy Bill completes Commons passage, says expert

Out-Law News | 05 Jun 2013 | 1:48 pm | 2 min. read

The Government missed the opportunity to clarify the "current policy tension" between low carbon electricity generation and gas during the final House of Commons debate on the Energy Bill, an expert has said.

Simon Hobday of Pinsent Masons, the law firm behind Out-Law.com, was commenting as MPs voted against including a 2030 decarbonisation target for the energy sector in the new Bill by a narrow majority. The Bill will now move to the House of Lords for further debate.

"Including a decarbonisation target in the Energy Bill would have sent a clear signal as to the Government's true intentions for incentivising low carbon investment and the place for conventional power generation," said Hobday. "Instead, the message to the market remains mixed at best and confused at worst."

The inclusion of a formal decarbonisation target in the new Bill had been proposed by Climate Change Select Committee head Tim Yeo, following an earlier recommendation by that committee. Yeo's amendment to the Bill would have required the Government to set a target by no later than 1 April 2014. The legislation as it stands instead gives the Government the power to take a decision on whether to set a decarbonisation target in 2016, at the same time as the UK's fifth Carbon Budget will be set. This will place a limit on carbon emissions economy-wide between 2028 and 2032.

The Energy Bill contains some of the most significant reforms to the UK electricity market since privatisation, and is intended to attract the estimated £110 billion of investment needed over the next decade to replace current generating capacity and meet increasing demand. It proposes a new system of financial incentives designed to ensure that low-carbon forms of electricity generation can compete fairly in the marketplace, backed with a 'capacity market' aimed at ensuring that consumers continue to benefit from reliable electricity supplies at an affordable cost.

The Government anticipates that the full programme of reform will be up and running by next year. It will apply in England and Wales, with the majority of the bill's provisions also extending to Scotland and a number also applying in Northern Ireland.

Commenting on the debate, Energy Secretary Ed Davey said that it "made sense" to set a decarbonisation target range in 2016 "once we've decided the level of economy-wide emissions reductions that will have to be achieved by 2030" under the Carbon Budget.

"This means that a target would not be set in isolation but in the context of considering the pathway of the whole economy towards our 2050 target, and making sure we do that in a way that minimises costs both to the economy as a whole and to bill payers," he said.

"Regardless of this, we're already bound by law to cut emissions across the whole UK economy by 50% by 2025, and the Energy Bill will bring about substantial decarbonisation of the power sector as part of that," he said.

According to the Government's Gas Strategy, published ay the end of last year, up to 26GW of additional gas generation capacity could be needed by 2030 even as the Government takes steps to incentivise the construction of new renewables infrastructure. Measures to encourage market certainty for investors in gas have formed an important part of the Government's electricity market reform (EMR) programme since the initial announcements, with the introduction of a capacity market to guarantee reliable energy supplies among them.