Government’s draft energy bill may reduce investment in sustainable energy projects

The Government's new draft energy bill could reduce investment in sustainable energy projects as it proposes to introduce a system of long-term contracts to give power companies a guaranteed price for the low-carbon electricity they produce.

According to MPs on the Energy and Climate Change Committee who have examined the draft legislation the proposals could enforce unnecessary costs on consumers, lead to less competition and deter badly needed investment.

Tim Yeo MP, Chair of the Energy and Climate Change Committee, said: “The Government is in danger of botching its plans to boost clean energy, because the Treasury is refusing to back new contracts to deliver investment in nuclear, wind, wave and carbon capture and storage.”

Mr Yeo added: “Electricity market reform is essential, but the new contracts proposed by the Government will not work for the benefit of consumers in their present form”.

“The Government has a lot of work to do over the summer to make sure that the Bill is fit for purpose in the autumn and is not subject to any further delays.”

The Commons Select Committee heard that the spending cap set by the Treasury, which limits the green levies that can be passed on to consumers in energy bills, could introduce an “unacceptable” level of risk to companies who are looking to build new wind, solar, wave or tidal power plants.

This is because the levy cap will ration the number of contracts available, creating uncertainty amongst investors about which projects will receive support.

This is already having an impact of investment decisions and could paradoxically push-up energy costs for consumers, the Committee said.

Mr Yeo, added: “Nobody wants to see a blank cheque written out for green energy, but the Government must provide investors with more certainty about exactly how much money will be available.”

Mr Yeo MP said: “The Government must rethink its plans urgently so that the investment that is needed to replace the UK’s aging power stations, cut carbon emissions and maintain energy security can be delivered.

The Committee says that the Government must come up with a stronger contract design before the Bill is expected to be introduced to Parliament in the autumn.

Mr Yeo added: “If the Energy Bill does not set a target to largely decarbonise the electricity sector by 2030, then the UK may miss one of the biggest opportunities it has to create a low-carbon economy in the most cost effective way.”

Leigh Stringer

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