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The Bigger Picture for Energy in the UK: Current Policies and the Energy Bill
Jim Watson, Research Director
Eversheds conference: Connecting Projects to the Grid18th June 2013
Overview
1.UK climate change targets and the electricity sector
2.Other energy policy goals: security and affordability
3.Meeting the goals: Energy Bill 2012/13
The UK’s low carbon transition
Keep the lights on at the same time
Source: Committee on Climate Change
The UK’s low carbon transition:CCC projection for 2020
Source: Committee on Climate Change (May 2013)
12GW of fossil and 3.5GW of nuclear plant retiresEU renewables target: 30-35% of electricity by 2020Energy efficiency; two CCS demos; 5GW unabated gas
The UK’s low carbon transitionCCC scenarios for 50g/kWh in 2030
Source: Committee on Climate Change (May 2013)
The UK’s low carbon transitionCCC scenarios for 50g/kWh in 2030
Source: Committee on Climate Change (May 2013)
Reducing emissions:progress to date
Source: Department of Energy and Climate Change
CO2 emissions are down 19% since 1990
But emissions rose 20% (1990-2009) on a consumption basis
Important for many reasons:• High energy prices since mid 2000s• Geopolitics and conflicts (e.g. Iraq war;
Russia-Ukraine gas disputes)• Impacts of extreme weather events (e.g.
power blackouts; hurricane Katrina)• Ageing and/or inadequate infrastructure
(power plants; gas storage capacity)
Debates often focus on international risks, but many risks closer to home
Domestic energy sources are not always more secure than imports
Maintaining energy security
1980 1985 1990 1995 2000 2005 2010
-200.0
-100.0
0.0
100.0
200.0
300.0
400.0
500.0
600.0
Exports Pipeline Imports LNG Imports Net Imports
TW
h
Source: DECC
Maintaining energy securityFrom gas exporter to importer / trader
Maintaining energy security:from gas exporter to importer
Source: DECC Energy Security Strategy (2012)
Maintaining energy securityFrom gas exporter to importer / trader
Maintaining energy security:will the lights stay on?
Scenarios from DECC and Ofgem
Source: National Grid 10 Year Statement (2012)
Maintaining energy securityFrom gas exporter to importer / trader
Maintaining energy security:will the lights stay on?
Three scenarios from National GridGone green and accelerated growth meet govt targets
Maintaining energy securityIncreasing / more complex power flows
Source: National Grid 10 Year Statement
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
100
200
300
400
Gas Electricity
Inde
x (2
000
= 10
0)
Gas prices have trebled since 2000
Electricity prices have doubled since 2000
Affordability:Domestic gas & electricity prices
Affordability: domestic electricity and gas prices
Affordability: what is causing higher bills?
AffordabilityImpacts of policies to 2020 (DECC)
Affordability: what is causing higher bills?
Trade-offs between policy goals
Energy Bill 2012/13: main elements
1.Emissions performance standard (EPS)To stop new, unabated coal plants being built
2.Capacity mechanismTo make it easier to justify investment in capacity that is not often used (to balance intermittent renewables)
3.Long term contracts for differenceTo give greater certainty to potential investors in capital intensive, low carbon plant (nuclear, offshore wind and CCS)
4.Carbon price floor already implemented: £15.70 / tonne from April 2013
Energy Bill 2012/13:levy control framework
2011-12 2012-13 2013-14 2014-150
1000
2000
3000
4000
5000
Renewables Obligation Feed in Tariffs Warm Home Discount
All
ow
ed S
pen
din
g (
£m)
Source: House of Commons Library
Source of finance for CfDs: cap on funding via consumer bills will rise to £9.8bn by 2020:
Click to add titleEnergy Bill 2012/13:some areas of debate
Main controversy is about 2030 electricity decarbonisation target. Narrowly voted down in the House of Commons: will be debated again today
Role of unabated coal. Current version of the Bill does not guarantee existing stations will close
Energy demand reduction (& response) incentives have been included in the capacity mechanism, though very late in the process
Provisions for smaller generators debated, but not yet included. Proposed ‘green power auction market’
Click to add titleEnergy Bill 2012/13:some unanswered questions
Will the government take up enabling powers to implement decarbonisation target in 2016 (alongside 5th carbon budget)?
Contract prices are being administratively set (see, for example, debate on Hinkley C). How and when will there be a transition to more competitive approach?
Until then, how will consumers be protected from paying too much for new low carbon power plants?
Will the Bill be ‘fit for purpose’ for smaller players and independents? Clear links to market competition issues
How much demand reduction & demand response will the capacity mechanism deliver?
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Thanks
http://www.ukerc.ac.ukhttps://twitter.com/watsonjim2
Source: DECC
Energy Bill 2012/13:contracts for difference