Any target to decarbonise the UK’s electricity supply in the forthcoming Energy Bill is likely to be more lenient than campaigners want, potentially opening the door for more gas generation.
But there are also fears the growing debate on the target is distracting from more important issues in the bill.
In recent days, various environmental groups and businesses have called for the bill to include a target for the carbon intensity of UK grid electricity to fall to 50 grams of CO2 per kilowatt hour by 2030. That compares with 486g today (ENDS Report, August 2012).
This will spur investment in renewable and nuclear energy, they argue, and reassure investors that the government does not want a new ‘dash for gas’.
However, the government is expected to put forward a more flexible target. This could say the UK will aim for 50gCO2/kWh by 2030, but this will be pushed back to 100g if the costs of meeting it appear too high.
The 100g target would allow the UK to get 15-20% of its electricity from gas in 2030.
This flexibility is being endorsed by the government’s advisory Committee on Climate Change (CCC) – a fact that appears to have been missed by many.
In September, the body wrote to energy secretary Ed Davey warning that “extensive use of unabated gas... in 2030 and beyond would be incompatible with meeting legislated carbon budgets” (ENDS Report, September 2012). It called for a 50gCO2/kWh target to prevent a dash for gas.
However, an annex added there should be “some flexibility to review [that target] through a clear, transparent and evidence-based process”.
At the end of September, the body’s chief executive David Kennedy fleshed out this position at a National Grid conference in London. He said that a target was needed but it should be “narrowed down to 50-100gCO2/kWh”.
“There is an argument that this should be put on the face of the Energy Bill, but I don’t think that’s sensible as it’d be committing to something that could be very expensive indeed,” he said. Instead, it should be set in secondary legislation and adjusted as the costs of future low-carbon energy development become clear.
The energy and climate department (DECC) appears to have locked onto those caveats.
Yet the pressure on the government to set a 2030 target has grown significantly this week.
On 8 October, a leaked letter from seven energy companies to the energy secretary calling for a 2030 target appeared in The Times.1
The firms, including nuclear reactor developer Areva and offshore wind manufacturers Siemens and Vestas, said their UK projects were at risk of “stranding” due to uncertainty over energy policies.
They said recent pressure from the Treasury to limit subsidies under the Renewables Obligation was creating uncertainty over whether the UK really wanted to decarbonise power generation (ENDS Report, August 2012).
“We consider that a binding 2030 target... would help to reduce the political risk currently associated with long-term UK industrial investment,” the letter said.
Also on 8 October, the Aldersgate Group of businesses wrote to chancellor George Osborne calling for the Energy Bill to include a 2030 target.1 The letter pointed out this would alleviate concerns that the government wants a ‘dash for gas’ at the expense of investment in renewable energy sources.
A draft bill published in May did not contain a target (ENDS Report, May 2012).
Friends of the Earth, Greenpeace, RSPB and WWF are currently jointly lobbying on the Energy Bill. Their main aim is a 50g/kWh target, included in the bill itself rather than in secondary legislation. In September, Ed Miliband also became the first leader of a major party to endorse a 2030 target (ENDS Report, September 2012).
However, government is insisting that any target would be set in line with advice from the CCC, which would allow it to adopt the flexible position.
According to the CCC’s modelling, under a 50gCO2/kWh scenario, the UK could get 40% of its electricity from renewables, 38% from nuclear and 14% from coal and gas plants fitted with carbon capture and storage (CCS). Most of the remaining 8% would come from unabated gas.
Under a 100g/kWh scenario, unabated gas would provide 15-20% of UK electricity supply. If higher carbon emissions were allowed from electricity generation, other sectors such as transport would have to do more to meet carbon budgets.
Some energy companies feel flexibility is the best option. Angela Knight, chief executive of trade body Energy UK, which represents the UK’s big six energy firms among others, said: “We are clear that a carbon target has its place, but there needs to be some flexibility according to how the economy is doing.”
Alan Whitehead MP, a member of the House of Commons Energy and Climate Change Committee which has called for a 50g target (ENDS Report, August 2012), said it would only be acceptable to lower the electricity target in future if other sectors such as transport could make up the difference. It would be wrong to allow the electricity sector target to fall simply because it was expensive because that would mean the UK would miss its carbon budgets.
However, Whitehead also warned that the current 50g/kWh debate risked distracting people from other issues such as the system of subsidies for renewables, nuclear power and carbon capture and storage, which the Energy Bill will create. These are known as ‘contracts for difference’. The bill will also put in place a capacity mechanism, under which gas plants could be paid to guarantee generation at peak times.
“If everyone just focuses on the 50g/kWh target, it could be the case that a lot of the staging for a dash for gas is achieved anyway,” he said.
Some investors also feel the 50g issue is receiving too much attention. Ben Caldecott, head of policy at Climate Change Capital, said: “There’s a focus particularly by NGOs on this 50gCO2/kWh limit as they’re trying to get a reaffirmation of the government’s commitment to meet the carbon budgets.
“While that would be a good thing, the key thing for investors is actually the details of the bill: how much support it will offer projects and for what volume.”
The government’s position on a 2030 target will become clearer in November when a first draft of the bill is submitted to parliament.