The government has published a long-awaited consultation on the review of how the energy market is regulated and priced, in a move which it is hoped will give energy companies more confidence to invest in low-carbon energy generation including nuclear power stations, Building reported.
Climate change secretary Chris Huhne said the reforms will pave the way for £110bn investment in low-carbon power by 2020. He added: “Without investment in renewables, new nuclear and carbon capture and storage, emissions will remain too high, we will become dependent on energy imports, and increasingly vulnerable to fossil fuel price volatility. In the new, reformed UK electricity market, the economics of low carbon will stack up like nowhere else in the world.”
The reforms are designed to ensure 30% of the UK’s energy come from renewable power, rather than the 7% generated today. At the same time, 20 large power stations are scheduled to be decommissioned and taken offline in the next 10 years.
The proposals include a “carbon price floor” which should provide a clearer long term price for carbon pollution in the power sector, and allow energy companies more certainty on long term contracts for low carbon generation.
The scheme would include a “top up payment” to low carbon generators if wholesale prices are low, but it is also designed to claw back money for consumers if prices become higher than the cost.
Huhne said the reforms would lay the foundations for a sustainable economy. “These reforms will… bring billions in investment in the UK through greater certainty, safeguarding jobs up and down the supply chain,” he said.
But while the consultation has generally been welcomed by the construction sector, there is concern that the government is set to water down proposals for the vital Green Investment Bank.
Building reported industry concern after Huhne let slip that plans for a Green Investment Bank – which could leverage government funds with finance raised on the open market – could be scaled back to a green bond fund.
The green bank plan was a key pledge in the Conservative’s election manifesto, aimed at raising private funds for green infrastructure projects.
But in an interview with the Guardian, Huhne hinted plans were being scaled back because the a any debt finance raised by the GIB would be added to the national debt pile, while the government’s priority was to restore credibility in government finances.
