The UK fails to deliver: fuel poverty is up, support for energy efficiency down

The UK is letting down its population by failing to deliver on energy efficiency. As a result, fuel poverty is up at the same time as fuel prices, and support for energy efficiency has plummeted and will continue to do so at the current rate.

This is happening under the watchful eye of Ed Davey, UK Secretary for Energy and Climate Change (right).

The most expensive and exclusive homes in Britain are the least well insulated, while the majority of the UK’s local authorities (LAs) are in breach of European regulations, and needlessly wasting energy, according to new research.

Not only that, but despite a year of public outcry about the cost of energy, the number of energy efficiency installations around the country has plummeted and Government has told energy companies that they can get away with insulating far fewer homes than before.

Whereas 1.61 million lofts were fully insulated in 2012, in the year to the end of October 2013, just 110,000 had been treated - a staggering 93% drop.

The same kind of drop has happened with cavity wall insulation, from 640,000 in 2012 to 125,000 in the year to October 2013, a pro-rata fall of 77%. These figures are official, from the Department of Energy and Climate Change (DECC).

The reason is because grants for such measures were dropped when the Government launched the Green Deal, a loan system that was intended to see a swathe of energy efficiency makeovers across the country, but which has so far failed to ignite public enthusiasm.

This is all despite the country having a Climate Change Act and an Energy Efficiency Strategy, which has an aim of cutting energy use by 196TWh by 2020 (an 11% cut), and carbon emissions by 41 MtCO2.



The Rich Don't Seem To Care

The rich don't seem to care about saving money, heat or climate change. In the exclusive parts of London, most occupied by millionaires, a staggering 83% of homes in Kensington and Chelsea and 79% in Westminster have uninsulated walls and a lack of loft insulation, coming at the bottom of a national league for energy efficient homes.

At the other end of the country, in colder Aberdeenshire and the Outer Hebrides, homes are insulated to the highest standard, with 65% and 66% respectively having installed wall insulation.

Utility company npower found these figures in data licensed from the Energy Saving Trust. They reveal that over half the 26 million homes in Britain allow too much heat to escape through the building fabric.

As a result, together with rising fuel prices, fuel poverty is higher than ever in the UK, with seven million people, including 2.2 million children, living in fuel poverty in England, a rise of 26% compared to a year ago. People are going without food in order to pay their energy bills. No wonder they can't afford the insulated their homes. This is exactly why they need help.

A telephone survey by npower found that just 20% of households asked have insulated their domestic hot water storage tank. When asked, the main reasons given for not installing energy efficiency improvements were:

• 42%: not being able to afford it;
• 36%: lack of government support;
• 33%: I can afford to waste energy (or words to that effect).

On the positive side, one third of those asked said they had made some improvements, such as installing loft insulation (39%), a new boiler/furnace (33%) and cavity wall insulation (30%).

The Green Deal Flop

The UK Government launched the Green Deal last year as a flagship policy to enable households to invest in home energy efficiency at little cost to them. But it has been a shambles, due to the difficulty of finding assessors, lack of publicity, and the cost of getting an assessment done.

This week, Greg Barker (right), an Energy Minister, claimed that: "It has been an encouraging first year for the Green Deal. It has not exactly developed in the way we anticipated [but] together with the ECO, the Green Deal has improved over 400,000 homes in their first eleven months".

He puts a nice spin on it. The ECO is the Energy Company Obligation under which utilities are forced to install energy efficiency measures in their customers' homes. The detailed figures show that 98% of those 400,000 homes' improvements were conducted through ECO, and not through the Green Deal.

The figures actually show that just 1,612 households had Green Deal Plans up to the end of 2013.

At this rate it would take 16,000 years to treat all of the nation's homes.

It Will Get Worse

The situation is going to get worse, not better. The Chancellor George Osborne announced in his Autumn Statement that the energy companies’ ECO target for insulating solid wall homes will be slashed by two thirds – meaning they are now only required to tackle 100,000 homes by 2017.

This change in policy comes after profits of the 'Big Six' energy companies (British Gas, Npower, Scottish & Southern Energy (SSE), Scottish Power, E.ON and EDF) rose 75% in 2012 on 2011, according to the regulator, Ofgem. The same companies complained to George Osborne before his Autumns Statement about 'green tariffs' such as the ECO adding to their costs.

The Green Deal has been slammed by many, such as the members of the Federation of Master Builders (FMB), whose chairman, Brian Berry, has politely said that the scheme "has not achieved the desired results in its first full year, with the majority of SME installers and homeowners failing to engage, and the financial package underpinning the scheme proving unattractive to most consumers."

He repeated the oft-made call that: "the single most effective measure to kick-start demand would be to reduce the rate of VAT from 20% to 5% on all domestic energy-efficiency work".

Paul King, chief executive of the UK's Green Building Council, was more forthright this week when speaking at a conference on the Green Deal. He called on the Government to "recognise energy efficiency as a national infrastructure priority and be prepared to delve into its purse to make its flagship policy more appealing through stronger incentives and more attractive finance options".

Local Authorities Flout the Law

Government and local government don't even practice what they preach themselves.

Separate research conducted by the Property and Energy Professionals Association (PEPA) has found that over half of local authorities throughout the UK are failing in their obligation to display up-to-date 'Display Energy Certificates' (DEC), as required by the European Union's Energy Performance of Buildings Directive (EPBD).

PEPA, the trade body that represents business engaged in the provision of Energy Performance Certificates (EPCs) and Display Energy Certificates (DECs), says that as a result they are missing out on the opportunity to use them as effective tools to reduce energy costs.

PEPA conducted a freedom of information exercise with all local authorities in England and Wales and found that only 47% of authorities claimed to be compliant with the DEC requirements, meaning 53% are potentially ‘breaking the law’.

A 2011 study by the Chartered Institute of Building Service Engineers (CIBSE) showed that where DECs had been used in government buildings as a proactive means of managing energy usage, savings of nearly 14% were achieved.

If these figures were applied to the estimated £750 million per annum of energy costs incurred by local authorities then energy savings of £65 million could be possible. This is a significant sum at a time when local authorities are cutting public services.

£1.9 million of public money is given to local authorities' Training Standards officers each year to ensure compliance with the EPBD regulations. But PEPA believes it is never used for that purpose since it isn't ring-fenced.

"There seems to be no political will within DCLG (the government department responsible for local authorities) to address non-compliance with the EPBD regulations and anecdotally is believed to regard the Directive as unnecessary European bureaucracy, something which is likely to end up with a fine from Brussels," said Stephen O’Hara, Chairman of PEPA.

“The whole situation regarding DECs defies logic and common sense. The proactive use of valuable energy information has been proved to reduce costs to the taxpayer, but government, both central and local, are either ignorant of this fact or do not seem to care. It is irresponsible of DCLG to show disdain for the regulations which they themselves have laid down as the law of the land, and potentially to incur swingeing financial penalties from Europe as a result.”

“Regardless of your views on climate change and reducing carbon emissions, saving money and reducing pressure on hard pressed energy supplies must surely make sense even to those who want to cock a snook at Europe.”

Employment Down

The drop in energy efficiency measures has had a knock-on effect on employment in the industry.

There are now at least 7,000 fewer people were employed in delivering insulation in homes than in 2012, according to Andrew Warren, CEO of the Association for the Conservation of Energy. “A lot of people went out and set up new small companies," because they thought the Green Deal would mean an increase in the amount of work. "They have been completely sold down the river,” he said, by the failure of government to deliver.

Andrew has for three decades been championing the cause of energy efficiency.

It's just a shame that no one at Whitehall, or in the town halls up and down the country, is really listening.

Notes

The European Union is conducting a household energy affordability study in conjunction with the University of York. You may take the survey here: http://energyaffordability.eu/?lang=en

The Energy Saving Trust says that the average (gas-heated, semi-detached) three bedroom home in the UK could save the following each year on their energy bills:

• Cavity wall insulation - £140;
• External Solid Wall insulation - around £490;
• Loft insulation - up to £180;
• New boiler (furnace) - up to £310.

Energy efficiency infographic courtesy of The Trillion Fund

DECC tables plan to support independent renewable energy suppliers

Energy Minister Greg Barker said: “Our new reforms will create the framework for a far more dynamic and entrepreneurial market”.

The Department for Energy and Climate Change (DECC) has published plans to help independent renewable generators gain entry to the electricity market, in order to promote competition and innovation.

Energy Minister Greg Barker has tabled an amendment to the Energy Bill that will make it easier for independent generators of renewable electricity to sell their power to suppliers via Power Purchase Agreements, thereby improving their access to market.

Energy Minister Greg Barker said: “The Coalition is committed to driving much greater plurality, innovation and competition in the electricity market.

“Our new reforms will create the framework for a far more dynamic and entrepreneurial market, while still ensuring that we get the large scale investment that industry needs. Opening up the electricity market to more competition is a fundamental part of the reforms we are introducing through the Energy Bill.

“It will also allow new smaller players to gain a greater share of the exciting renewable electricity market.”

The amendment allows for the creation of an off-taker of last resort to be enabled, providing ‘back-stop’ power, providing greater certainty for renewable generators and investors.

Independent generators do not usually have a strong supply arm that sells electricity direct to consumers and have been finding it hard to enter the market, which is dominated by the ‘Big Six’ vertically integrated energy companies.

DECC says such companies "play an important role in helping to meet the country’s renewable energy targets, account for a significant chunk of the new energy infrastructure projects that are awaiting final investment decisions", and also introduce innovation and competition into the market.

The amendment would enable the Government to establish a scheme obliging suppliers to buy electricity from renewable generators under specified conditions if they were unable to agree a commercial contract. It would be used as a last resort, to strengthen routes to market and stimulate competition.

Detailed proposals will be developed and consulted on later this year.

Independent generators often sell their power to suppliers via power purchase agreements, and this is how they gain a route to market. The definition can cover a range of technologies and sizes.

Earlier this week DECC also published a draft delivery plan for Contract for Differences (CfDs) and the reliability standard of the future Capacity Market to guide how much capacity is auctioned in 2014 for delivery in 2018 to 2019.

Unveiling the plan, Secretary of State Ed Davey said it should "provide investors with further certainty of government's intent" to help incentivise up to £110 billion of funding for new electricity infrastructure by 2020.

Woodfuel conditions

DECC also issued a condition that new standalone biomass power plants will not be eligible for some subsidies unless they also generate heat, meaning many new plants could be cancelled, according to the Renewable Energy Association (REA), which represents large biomass generators. Gaynor Hartnell, its chief executive, said that combined heat and power (CHP) could not easily be retrofitted onto projects that had already been approved.

The move was welcomed by the Combined Heat and Power Association, which has lobbied in its favour. CHP is seen as much more efficient, as otherwise the heat goes to waste.

DECC also plans to restrict subsidies for biomass to 400MW per plant under the Renewables Obligation, which will operate until 2018.

The restriction does not apply to plants converting from coal-fired power, such as Drax, Britain's biggest power station. This means that large scale, controversial imports of wood pellets to Britain will continue, at least until the subsidies phase out in 2027.

On Wednesday, Mr Davey said that importing wood and burning it as biomass was not a long-term answer to the country's energy needs, leading to expectations that the government would reverse its support policy, but this has not materialised.

"This is something we already knew and does not mark a change in government policy," a Drax spokeswoman said.

DECC does believe that biomass is a transitional technology, "to be replaced by other, lower carbon forms of renewable energy in the medium to long term", it said in a statement.

Environmental groups are concerned that growth in Britain's bioenergy industry will mean the felling of virgin forests for fuel, a practice that was commonplace in Europe and North America before coal was used to power the industrial revolution. They are also worried that it takes 50 years to absorb from the atmosphere the carbon dioxide that is emitted during the burning of a tree.

Drax asserts that the woodfuel it imports has cut emissions in converted units by 80% compared with burning seaborne coal, and that it is certified as sustainable.

Last week, RWE npower said it would close a newly converted 750-megawatt biomass plant at Tilbury by July 21 because of a forecast drop in UK power prices and lack of capital from the Germany-based parent RWE.

Last year Drax also scrapped plans to build a new dedicated biomass plant on its site in North Yorkshire, due, it said, to insufficient government support.

Energy Minister Greg Barker said: “Our new reforms will create the framework for a far more dynamic and entrepreneurial market”.

British Prime Minister opens world's largest wind farm

David Cameron called the London Array  "a big win for is renewable energy" because it shows that we can "have renewable energy projects at scale... right here in Britain".

Yesterday saw the launch by Prime Minister David Cameron of the world’s largest offshore wind power plant, the London Array, located in the Thames estuary, approximately 20 kilometres off the Kent and Essex coast.

Owned, developed and built by a consortium consisting of Dong Energy, E.ON and Masdar (Abu Dhabi’s state backed renewable energy company), it has a total capacity of 630 megawatts (MW) and will generate enough power to supply 500,000 British households with clean electricity.

It is estimated to reduce annual CO2 emissions by approximately 900,000 tons, equivalent to the emissions of 300,000 passenger cars. Construction involved over 75 organisations and 6,700 people.

The London Array consists of 175 wind turbines supplied by Siemens, who also made the grid connection. Dong Energy and Siemens will be responsible for the service of the wind turbines through a long-term agreement.

DECC said that companies from all over the UK had benefited, "with construction supplies ranging from cable manufacturing in Yorkshire to boats from Brightlingsea to wind towers from Scotland".

Speaking at the launch, the Prime Minister used the occasion to back wind power and overseas investment in Britain, calling it "a triple win".

“First of all it’s a huge win for Kent. This project has been built by some of the bravest seaman, some of the most talented engineers, some of the hardest workers, and it’s going to continue to bring benefits to people in Kent for many, many years to come," he said.

He added that it's certainly "a big win for is renewable energy" because it shows that we can "have renewable energy projects at scale... right here in Britain".

Thirdly, he said it proved that Britain can "do big projects", citing also "a superb Olympics", Crossrail, "the biggest construction project in Europe", London Gateway, "the biggest port construction taking place in Europe", and "here you have the biggest offshore construction anywhere in the world. I think this demonstrates Britain is a great place to invest,” he concluded.

Energy Secretary Ed Davey called it “a bulk generator of power feeding into the diverse mix on our grid. It’s attracted billions of inward investment into our economy".

He added that the reforms outlined in the Energy Bill are intended to make sure that more projects like this come about.

Other massive projects (a total of 15 GW) are already in the pipeline, such as Teesside, Gwynt y Mor off the coast of North Wales and West Of Duddon Sands off the north west coast of England.

At Gunfleet Sands, off the Essex coast, the next generation of even more powerful offshore turbines is being tested in the water for the first time anywhere in the world.

At the end of March, the 75th and final turbine was installed at Lincolnshire's windfarm off the coast of Skegness, which has the capacity to power more than 200,000 homes.

Speaking at the opening, RenewableUK’s Chief Executive, Maria McCaffery, said: “The Prime Minister’s ringing endorsement of Britain’s offshore wind industry is a real boost for the entire renewable energy sector, which is a key growth area for the British economy.

“We’re about to witness a massive expansion in the number of people we employ in the wind industry onshore and offshore, from about 12,000 now to 76,000 by the dawn of the next decade, as long as Government remains supportive – today Mr Cameron has assured us that it will”.

The UK is expecting that offshore wind farms will help it reach its legally-binding targets to cut carbon emissions, with an aim of developing 18 gigawatts by 2020.

Doha: Climate negotiators fail to meet the scientific challenge

Young UNICEF UK campaigners asking Ed Davey to speak up for children before he left for the UN climate change talks in Doha. Photo: Rosie Reed Gold/UNICEF.

On the last day, talks at Doha aimed at securing a global agreement to tackle climate change are providing scant hope, although individual announcements from nations on the sidelines provide some progress.

The central issue, as always, is fairness over who pays.

US lead negotiator, Todd Stern, told the plenary assembly that he wanted to see “the principle of equity and common but differentiated responsibilities and respective capabilities" provide the basis of agreement, but that "unless we can find common ground on that principle and the way in which it should apply in the world of the 2020s, we won’t succeed in producing a new Durban Platform agreement”.

The U.S. has a target of reducing emissions by 17% by 2020 compared to 2005 emissions (equal to just 4% below 1990 levels). Its negotiators said that this is unlikely to change. They say they cannot see a way of getting a global agreement for seven years; until 2020.

Like 85% of nations, the U.S. has spurned extending the Kyoto Protocol, leaving a group led by the European Union and Australia to take this forward. They believe Kyoto is no longer relevant because emerging nations led by China and India will have no targets to curb their soaring emissions from 2013.

Delegates have been repeatedly told how dire prospects are. "If anything, the science is telling us it's now getting warmer quicker than we had previously expected," said UK Energy Secretary Ed Davey, who is in Doha. "Our actions as a world are going slower than we had previously hoped."

"The question of climate management is extremely serious," Laurent Fabius, France's foreign minister, agreed. "It appears we have already exceeded the 2-degree limit. If that is the case, there are absolutely catastrophic consequences. We must react." Tackling climate change is "the new challenge in world diplomacy".

But so far, too few countries are making the kind of commitments to cut emissions that scientists agree would keep global warming below the 2 degrees Celsius limit that is estimated to prevent the most devastating effects of climate change.

Many attending the Doha talks are saying that 4 degrees Celsius of global warming by 2100 looks almost inevitable.

Meanwhile, countries debate who will pay to save the planet.

Qatar has offered no money. National pledges by Germany, Britain, France, the Netherlands, Sweden, Denmark and the EU Commission in Doha total over 6.85 billion euros for the next two years, more than in 2011-12.

The UK will be allocating around £1.8 billion aid money to climate finance up to 2015. Ed Davey, speaking at Doha, reiterated the UK’s support for contributing to the $100 billion a year by 2020 commitment of new and additional funds.

Germany and Britain this week launched the NAMA (Nationally Appropriate Mitigating Actions) Facility, to support countries to implement action against climate change. Ed Davey, pledging £25 million from the International Climate Fund (ICF), said it will “help support those developing countries that are taking ambitious action to close the gap to 2°C". Countries will compete for the funding to support their own projects. One in Mexico will go towards sustainable new housing by establishing the necessary framework conditions.

Hosts Qatar did say they will develop a 1,800 megawatt (MW) solar energy plant in 2014 costing up to $20 billion, mainly to power its desalination plants. The country has no naturally-occurring pure water. It will increase the proportion of its renewable electricity generation to 16% from zero. "We need to diversify our energy mix," said Fahad Bin Mohammed al-Attiya, chairman of the Qatari organizers of climate talks in Doha. Qatar supplies Britain with much of its liquefied natural gas (LNG) and is the world's top exporter. But it has not set any targets for reducing its greenhouse gas emissions.

A senior Saudi Arabia official said his country was taking the climate change issue "seriously. It is implementing carbon capture storage in the world's biggest oilfield, Ghawar, where injecting carbon dioxide back into the field helps to raise pressure and increase oil output, as well as trapping planet-warming gas".

Indonesia announced it has approved a U.N.-led rainforest conservation scheme under Reducing Emissions from Deforestation and Degradation (REDD), that sets aside nearly 80,000 hectares (200,000 acres), much of it carbon-rich peat swamp forest at risk of being felled for palm oil plantations, and rewards its investors, Russian energy giant Gazprom and German insurance firm Allianz, with 104 million tradable carbon offset credits. Each credit represents a metric ton of carbon, worth almost 500 million euros based on current market rates. It is the first scheme of its kind to win formal backing in the country, and the world's first on protecting 'deep peat'.

Back in the U.S., the Obama administration said it is to invest $120 million in developing cheaper batteries for electric vehicles and grid storage. The five year project will establish a research hub with Dow Chemical Co, Applied Materials Inc, Johnson Controls Inc and the Clean Energy Trust.

Still in the U.S., the Federal Energy Regulatory Commission reported that from January to October, 46.2% of new electricity-generating capacity installed was renewable. Wind accounted for 77% of this.

But the reality is that all of these announcements are nothing like what is required; they are like using a bucket to bale out the rising oceans.

"Some sort of agreement will be achieved – it always is," writes observer Giles Parkinson. However, he concludes, "the more that the UN talks fall short of expectations, the more that domestic politics plays into the hands of vested interests".

Next year, coal-dependent Poland will host the talks. Environmentalists expect little progress there either. They are now looking to Paris, which will host the 2015 talks, for realistic progress.

The world is heading for a ”carbon cliff” - PwC

PwC's Jonathan Grant says "we are heading for a carbon cliff" unless habits are changed.

PwC is warning today that the world is heading for 6°C warming unless emissions of greenhouse gases go into reverse.

The annual rate of reduction of carbon emissions per unit of GDP needed to limit global warming to 2°C has passed a critical threshold according to new analysis in the PwC Low Carbon Economy Index, published today. This measures developed and emerging economies' progress towards reducing emissions linked to economic output.

It demonstrates that at current rates of emissions growth, at least 6°C degrees of warming could be possible by the end of the century, which would result in large parts of the world becoming uninhabitable.

While last month, Britain topped a European league table for reduction of greenhouse gas emissions, it is by no means clear that this reversal will continue, as Government policy is to maximise oil, gas and coal extraction, and to build a new generation of gas-fired power plants.

The PwC report

The PwC report shows that to limit global warming to 2oC would now mean reducing global carbon intensity by an average of 5.1% a year, a performance never achieved since 1950, when these records began.

PwC's director of sustainability and climate change, Jonathan Grant, says that "we are heading for a carbon cliff" unless habits are changed. "Even doubling our current annual rates of decarbonisation globally every year to 2050, would still lead to 6oC, making governments’ ambitions to limit warming to 2oC appear highly unrealistic.”

Andrew Sentance, PwC's senior economic advisor, says that "Government policies must radically change", and that for business this "represents an opportunity as well as a risk".

“The challenge now is to implement gigatonne scale reductions across the economy, in power generation, energy efficiency, transport and industry, as well as REDD+ in forested nations,” added Grant.

With less than four weeks to the UN Climate Summit in Doha, the analysis illustrates the scale of the challenge facing negotiations. The issue is further complicated by a slow market recovery in developed nations, but sustained growth in E7 economies which could lock economic growth into high carbon assets.

Emerging markets’ previous trends on carbon emissions reductions linked to growth and productivity have stalled, and their total emissions grew by 7.4%.

By contrast, the UK, France and Germany achieved record levels of annual carbon emissions intensity reductions, but were helped on by milder winters.

Examining the role of shale gas, PwC’s report suggests that at current rates of consumption, replacing 10% of global oil and coal consumption with gas could deliver emissions savings of around 3% a year (1gt C02e per annum).

However the report warns that while it may “buy some time”, it reduces the incentive for investment in lower carbon technologies such as nuclear and renewables, and could lock in emerging economies with high energy demand to a dependence on fossil fuels.

America has been exporting the coal it would have burnt had shale gas not displaced its domestic use, so, globally, a shift to shale gas in one country alone makes little difference to overall emissions.

This underlines the importance of reaching a global deal at Doha, PwC says.

UK oil, gas and coal extraction

At home, British policy on reducing carbon emissions no longer appears as consistent as it did until recently.

On 25 October, Energy Minister John Hayes announced 167 new North Sea oil and gas licences, saying that every last economic drop of oil and gas from the North Sea will be extracted.

In answer to a question from Green MP Caroline Lucas last Friday, about whether the effect of this on achievement of the UK's domestic carbon budgets had been calculated, he gave no indication that it had, instead repeating that the Government “aims to secure over time the maximum economic recovery" of the "20 billion barrels of oil equivalent left on the Continental Shelf".

If all this were to be burnt, it would lead to the emission of 872 trillion kgCO2.

Meanwhile, despite a decline in the demand for coal caused by six British power stations having to close by 2016, the coal industry, through CoalPro, their producer’s association, hopes that the industry will be able to maintain a total of approximately 36 working surface mines across the UK, according to the Loose Anti Opencast Network (LAON).

LAON’s latest review of the stage at which 22 current and possible opencast planning applications across the UK have reached, has just come out.

LAON is calling on the Government to align its planning policy with its energy policy. Steve Leary, its coordinator, says: “It is the Government's intention to phase out the use of coal for power generation purposes, leading to a 75% decline in the use of coal for such a purpose over the next 10 years, whilst at the same time, through provisions in the Growth and Infrastructure Bill, it is possibly making it easier to dig the coal out".

He says this coal would probably be exported if not burnt at home.

This morning, activists from the No Dash for Gas campaign who have been protesting at the Government's policy to build a new generation of 20 gas-fired power stations, are ending a seven day occupation of the 300 foot high chimneys of EDF's West Burton 1,300MW Combined Cycle Gas Turbine (CCGT) plant, currently under construction in Nottinghamshire.

Energy and Climate Change Secretary, Ed Davey, has guaranteed that if built, these stations will be exempted from emissions regulations and can continue emitting CO2 unabated until 2045.

Call to decarbonise
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In a timely move, the Carbon Capture and Storage Association, the Nuclear Industry Association and RenewableUK have today issued a joint call to Energy Secretary Ed Davey to largely decarbonise the power sector by 2030.

The three associations, representing over 1,000 corporate members, make the request  in a letter  copied to the Chancellor, Prime Minister, Business Secretary and Deputy Prime Minister and Minister of State at the Cabinet Office.

The letter states that including a reference to the objective to largely decarbonise the power sector by 2030 in the Bill would reassure potential investors by lowering political risk and bring the cost of capital down for lower carbon generation.

The organisations stress, however, that any target set in legislation should serve a specific and necessary purpose and not contribute to so-called "target fatigue" in the energy sector; and it

Davey goes for gas as €9.5 billion price rise forecast for 2013

 Ed Davey at Gastech today.

Rising gas and power prices will cost European industrial energy buyers an additional €9.5 billion in 2013 according to new forecasts.

The news comes on the day that major corporations including BT and Microsoft are urging George Osborne and the Conservative Party to do more to support renewable energy, and Ed Davey told the GasTech conference about his commitment to gas.

€4.2 billion of these forecast price increases will be due to hikes in gas prices, and €5.3 billion to growth in the price of electricity, market consultants EnergyQuote JHA, will say at their biannual energy price forecasting conference which begins on Wednesday.

UK consumers will see an increase of between 5% and 7%. This is not the highest in Europe by any means: the Dutch will find prices 12.5% higher and Germany Austria and Belgium businesses will face increases of over 10%.

Britain is in the process of approving a number of new gas-fired power stations, which would leave the nation at the mercy of such future price increases. Ed Davey, Energy Secretary, has said that up to twenty could be built over the next two decades.

He told the Gastech Conference & Exhibition this morning that gas will be important even through to the 2040s, and said the sector needed £110 billion of investment in power generation and transportation to 2020.

He said a new generation of gas-fired power stations must be built ready for carbon capture and storage. “CCS matters not only for the continued use of gas in the long-term in the UK; it is also vital for cutting emissions globally. And as we prove the commercial viability of CCS, we have the chance to create in that process an exciting export opportunity for companies that become early leaders in this technology.”

He also said that he is waiting for evidence on the viability of shale gas in the UK before making a decision about it.

He was followed by BG Group's CEO, Sir Frank Chapman, who said: "We must prove that gas is the 'destination fuel' of the low carbon economy".

A new 880 MW combined cycle gas turbine (CCGT) power plant, which will be built by engineering consortium Alstom Duro Felguera and Carrington Power, secured financial support for its development in Manchester last week.

That the gas industry is in buoyant mood is evident at its industry conference, which is happening this week at ExCeL London.

Tomorrow, the conference is being attended by Russian Energy Minister Alexander Novak, giving his first press conference in the UK since he was appointed to the role in May this year. He will be anxious to promote the advantages of Russian gas.

He is being accompanied on his visit to this country by Alexey Kalinin, who, as Rosatom’s Head of International Business, represents another Russian energy sector, nuclear power, that is anxious to sell into Britain.

He will be speaking about Rosatom’s willingness to develop a new nuclear skills base in the UK, to an audience at a Centre for Policy Studies Fringe Meeting during the Conservative Party Conference, that will include John Hayes MP, the new Minister for Energy & Climate Change.

Whether Britain builds a new generation of gas-fired power stations, new nuclear plants, or invests further in home-grown renewable energy, will determine not just the price of energy in the future, but UK energy security and whether the country will meet its 2050 carbon emission targets.

Major companies lobby Osborne

Over 50 companies, investors and industry bodies, including EDF, BT, Microsoft, Marks & Spencer's and PepsiCo, are signatories to a letter sent to George Osborne, David Cameron and other senior Tories today, warning that sending out mixed signals on energy policy risks undermining investment in renewable energy.

They back the setting of a 2030 target for decarbonising the electricity sector, which is urged by the Committee on Climate Change, because reliance on gas beyond 2030 would be incompatible with meeting legally binding emissions targets set under the 2008 Climate Change Act.

“It is essential for government to provide investors with the long-term confidence they need to transform our electricity market and make investments capable of driving wider economic growth,” the letter says, going on to warn that the Government's commitment to green power is being “undermined by recent statements calling for unabated gas in the power sector beyond 2030”.

"Failure to act at sufficient scale and pace will undermine our prosperity and cause us to miss out on the huge commercial opportunities associated with the global shift to a low carbon, resource efficient economy," it says.

The letter is organised by the Aldersgate Group.

Decarbonisation target

The Financial Times is reporting today that utility company SSE also supports a 2030 carbon intensity target, because it “could provide much-needed certainty for low-carbon investors, showing developers that the government is committed to decarbonisation in the long term”.

Both Labour and the Liberal Democrats are in favour of a 2030 decarbonisation target of 50g CO2/kWh, which will be set in the context of the Energy Bill that will be laid in final draft before Parliament towards the end of the year.

Ed Davey's recent thinking is that there should be such a target, but within it there should be some flexibility. He reportedly wants to see a target range for different sectors.

This is a model also being considered for an amendment to the Bill by Friends of the Earth.

This would stipulate a general 50g CO2/kWh by 2030 target, but allow for flexibility within the context of an overall 2050 carbon target. The fixed target would be invoked in primary legislation, but secondary legislation could support different targets for, say, transport.

This would take the burden of responsibility away from resting solely upon the energy sector.

The environmental lobby body is cautious however. Donna Hume, FoE's energy campaigner, has warned that adopting a decarbonisation "range" instead of a specific target could result in the UK failing to deliver the necessary emissions cuts.

"A decarbonisation target would provide greater clarity on the direction of travel for many renewable energy businesses after 2020," she said. "It would also ensure it was a more democratic and transparent process."

DECC "pleased with progress" towards climate change targets says chief civil servant

Welshman Phil Wynn Owen, Director General of DECC's International Climate Change and Energy Efficiency group.

The British Government is pleased with its progress towards meeting its climate change targets and in steering the European Union and the United Nations climate talks in a satisfactory direction, according to a senior official within the Department for Energy and Climate Change (DECC).

Speaking exclusively to me at The Energy Event at Birmingham's National Exhibition Centre yesterday, the official said that, given the long timescales involved, DECC is happy with progress so far.

Phil Wynn Owen is Director General of the International Climate Change and Energy Efficiency group. Before that, he was an official in the Treasury. His remarks, paraphrased below, give an insight into thinking within senior levels of government.

UN discussions

The top-level Conference of the Parties (COP) United Nations Framework Convention on Climate Change (UNFCCC) talks, designed to reach global agreement on limiting greenhouse gas emissions, happen at the end of each year. At the last of these talks in Durban, it was agreed that nations would put in place by the end of 2015 a binding legal agreement to curb greenhouse gas emissions that will take effect in 2020.

The UK government was pleased and surprised by this outcome, given the pessimism that preceded these talks.

In between these annual talks are interim negotiations. UK officials were disappointed by the progress made at the last of these, which took place in Bonn earlier this year and ended without agreement. They therefore led calls, together with Christiana Figueres, the Executive Secretary of UNFCCC, for a further meeting, which happened in Bangkok at the end of August and beginning of September.

Whereas outside reports expressed dismay at the lack of progress made there, too, DECC officials believe that significant progress was made, laying the groundwork for a legal agreement.

There was also good progress in negotiating a successor framework to the Kyoto Protocol.

DECC had a large team negotiating in Bangkok, who played a significant part in the production of the first draft of a full negotiating text. This will be discussed at the next Conference of the Parties (COP 18) in Doha, Qatar in late November this year.

The UK Government believes it is very important that these forthcoming talks will take place in the heart of the oil-producing Gulf states.

Energy and Climate Change Minister Greg Barker told an All Party Parliamentary Group meeting at the House of Commons on Monday that he feels the talks “offer a unique opportunity to encourage the major oil and gas producing states to recognise the benefits of signing up to a low carbon agenda".

DECC is thinking particularly about Saudi Arabia, which has recently announced a huge commitment to solar power. At previous COP negotiations its team has resorted to blocking and delaying tactics and watering down mitigation targets. DECC believes that this November's talks offer an opportunity for Saudi Arabia to see the benefits of behaving otherwise.

The long view

The senior DECC official turned to the disparity between Government and business attitudes towards the low carbon agenda, the latter of which on the whole are enthusiastic, since the sector is one of the few areas of the economy which is experiencing significant growth.

Here, with the longsighted vision of a long-serving civil servant, Mr Owen paid tribute to the manner in which the UK Government conducts its consultations and discussions on developing its energy policies.

While recognising that some sectors would like government to move faster, most appreciated that, with resources tight due to the ongoing recession, it was necessary to have a debate which took in the views of all sides on the most cost-effective way to decarbonise the country and adapt to climate change.

Dominant thinking is now that the greatest opportunities lie in cutting energy use, reducing demand, and energy efficiency.

The beginning of Mr Owen's presentation to delegates yesterday morning was taken up with extremely depressing figures about the rate of increase of climate-warming emissions and their likely effects on overall average global temperatures.

At present trends, the world is headed for at least 3°C warming, which will create a “very high risk of economic impact", he said.

By 2020 there is likely to be an atmospheric concentration of carbon dioxide greater than 550 ppm, which means that after that year emissions will need to reduce by up to 2.5% per year, a daunting prospect.

DECC is still very aware of the recommendations of the 2007 Stern Review, which said that early action to tackle climate change would be much cheaper than waiting and taking action later. Mr Owen reported that its author, Nicholas Stern, is “very pessimistic" these days.

He, however, remains optimistic. Turning around the behaviour of a whole country, let alone the whole world, is bound to take far longer than turning around the behaviour of any single company, no matter how large.

Moreover, companies have a completely different command structure to government and nations, unless they are totalitarian and can therefore act more quickly. This explains the long timescale required.

Mr Owen said that the measures contained in the Green Deal, the introduction of 53 million smart meters by 2019 in 30 million properties, and the Renewable Heat Incentive, which will increase the proportion of renewable heat from the current 1% to 12% by 2020, all give grounds for optimism.

Within the proposed Electricity Market Reforms, the capacity mechanism, the carbon price floor, and contracts for difference, will all help to leverage the £110 billion of investment required by 2020 to decarbonise the energy infrastructure.

He backed Ed Davey's defence of these measures, published yesterday, saying that they will create at least a quarter of a million jobs.

Moreover, energy intensive users will be compensated for the effects of the measures on their energy bills.

Mr Owen added that DECC is still lobbying within the European Union for it to commit to a 30% target for reducing emissions by 2020.

Mr Owen is clearly proud of his department's achievements; that it, and therefore the UK as a whole, is playing a vitally important role in steering the whole world away from completely disastrous climate change.

Government should set a 2030 decarbonisation target

George Osborne's Liberal Democrat deputy, Danny Alexander will call for a target and criticise his boss's attitude to low carbon tech at the Lib-Dem party conference.

The role of gas-fired generation and the setting of a 2030 decarbonisation target for the electricity market has become the focus of a bitter battle between Lib Dems and George Osborne.

Yesterday, Edward Davey, Secretary of State for Energy and Climate Change, responded to a letter from the Committee on Climate Change, signed by its new Chairman, Lord Deben, criticising the recent Government statement that gas would continue to play an important role in the energy mix beyond 2030, not restricted to providing backup to renewables".

The letter added that this position could be illegal under the Climate Change Act 2008, and “weakens the signal provided by carbon budgets to investors" in clean tech.

It also recommends the setting of a clear carbon emission objective for electricity market reform, of around 50g of CO2 per kilowatt-hour by 2030.

Earlier this year George Osborne ruled out such a measure, expressing concern that such a target would undermine investor confidence in the gas industry, which he wants to build up.

In short, the argument between Osborne and DECC is about whether investment should be predominantly directed into renewables or gas. Gas, being cheaper, is favoured by Osborne.

But it is also an argument between the Lib Dems and Conservatives. Osborne's Liberal Democrat deputy, Danny Alexander, has signalled that he will call for a 2030 decarbonisation goal to be implemented when he speaks at the party's conference in two weeks.

He will also use his speech to attack the Conservatives for not acknowledging the economic benefits of investing in low carbon tech.

In reply to the CCC letter, Mr Davey, who this week adopted responsibility for renewables policy that was previously the ex-energy minister Charles Hendry's brief, issued a statement.

This said that a target is "under consideration" but argued that the Government's "existing plans are consistent with significant decarbonisation of the power sector".

Davey is known to believe that a limit on carbon emissions from the sector could be achieved using a statutory instrument instead of being included in the Energy Bill.

Osborne is currently sanguine about DECC's consultation on a carbon emissions limit for 2030, because he doesn't think it would make a material difference in practice.

But Davey's ace in his hand remains the carbon budgets that have been agreed by Parliament, which could trump Treasury policy provided that it is played with a strong suit.

Davey's response to the Committee's letter emphasises this, that the statutory carbon budgets that are set by the Committee, and agreed by Parliament, underscore all policy and planned market reforms.

“We have always said [our reforms] will include gas fired plant," the statement says, “which is quick to build and flexible." But "after 2030 we expect that gas will increasingly be used only as back up, or fitted with Carbon Capture and Storage technology.

"Alongside up-scaling of renewables, nuclear new build, and eventually with carbon capture and storage, gas has an important role to play in the transition to a low carbon grid."

But how much gas generation could be installed and still permit the UK realistically to meet its carbon budgets?

“Our numbers show that we can accommodate around 30 to 45GW of unabated gas over the next twenty years and still hit our carbon targets, but any further fossil fuels will need CCS, which is not yet commercially viable," Davey said on Wednesday.

This means over a dozen new gas-fired power plants in the next 15 years.

While the Committee's letter was greeted with approval by the clean tech sector, this response by Davey has been met with scepticism.

Utility company SSE tweeted that, contrary to the Treasury view, a "2030 decarbonisation target in EMR would provide much-needed certainty for low-carbon investors and developers".

Climate and energy campaigner for Greenpeace, Joss Garman, calculated that “where you have as much as 45GW of unabated gas in 2030 (and if you assume demand by then of around 420TWh), this would require that all those gas stations are only operating for 15% of the time if we are to keep on track with carbon targets. It also requires all of the UK’s coal stations are shut down or operating with fully functioning Carbon Capture and Storage (CCS)."

"The UK is already over-reliant on gas, which was the main driver behind recent energy bill rises," said Keith Allott, head of climate change at WWF.

The cross-party energy select committee, led by Tim Yeo, has also reiterated calls for a 2030 decarbonisation goal.

“Our gas generation strategy work is about providing certainty to investors to ensure sufficient investment comes forward, whilst also living within our legally binding carbon budgets,” concluded Ed Davey's statement.

To Garman and the other objectors, this seems like trying to have your cake and eat it.

Davey buys £20m for onshore wind in exchange for £500m for gas

Subsidies for onshore wind farms will be reduced by 10%, not the 25% demanded by the Treasury, says Energy Secretary Ed Davey, but at a long-term cost to carbon emissions.

To win this agreement, the Department has had to concede that gas generation will continue "to play an important part in the energy mix well into and beyond 2030, while meeting our carbon budgets".

This "important part" is ensured with a grant of £500 million for gas field exploration. To put this in context, the dispute between the Treasury and DECC centred over a difference of around just £20 million in support for 1GW of onshore wind.

The effect on greenhouse gas emissions after 2030 is likely to be alarming. David Nussbaum, chief executive of WWF-UK, sent a letter to David Cameron yesterday, complaining of "a clear bias on the part of Mr Osborne towards investment in new gas-fired power stations" which would imperil the UK's climate targets and could raise bills for consumers.

“The proposal that emissions from gas plants built before 2015 will effectively never have to limit their emissions jeopardises our ability to meet UK carbon targets," he said. “The announcement on this, which was slipped out late on a Friday and which had the Chancellor’s fingerprints all over it, is another example of the Treasury’s malign influence on energy policy."

John Sauven, Greenpeace's executive director, also commented that: “The Treasury is fighting tooth and nail to oppose a 2030 decarbonisation target or support for future renewables targets. Mr Osborne has rebranded himself Mr Polluting Gas. It's up to Nick Clegg to stick what's left of Lib Dem principles back into this process."

£25 billion investment

However, marine energy developers will celebrate a 250% increase in their support from 2 ROCs (renewable obligation certificates) to 5 ROCs per MWh, subject to a 30MW limit per generating station.

"The case for investment in renewable energy is so strong and that is why, across government, we are backing it," said Energy Secretary Mr. Davey, making the announcement.

He said that representatives of industry and business support the subsidy cut of 10%, but not of 25%. “And that will bring forward investment between £20 and £25 billion between 2013 and 2017, and create hundreds of thousands of jobs," he promised.

"No one would want to over-subsidise an industry," he said.

He tried to reassure the wind industry by saying that there would not be a further change in the support levels or targets for carbon reductions in the autumn.

"The climate legislation says that if there has been a change in any of the generation costs for a renewable technology, whatever it is, we should have a review. So if it does change dramatically, then of course everyone agrees that we should have a review."

When pressed by James Naughtie on the Today programme this morning, Ed Davey said that meeting emission reduction targets depended on carbon capture and storage and nuclear power coming on stream by 2030, as well as major investment in renewables. He did not mention demand reduction.

"We don't have a target for the amount of energy to be generated from renewable sources at the moment," he said. Mr Davey said that there was cross-party agreement on the legally-binding targets to reduce carbon emissions. "What we're discussing is whether there should be an intermediate target for decarbonising the power sector. There is a debate to be had about that, around the Energy Bill," he said. That is expected in the Autumn.

The announcement of the results of the Banding Review consultation for the Renewables Obligation was delayed last week, following intervention from the Treasury, but was finally announced today.

The Department for Energy and Climate Change (DECC) quantified the impact on consumer bills between 2013 and 2015, as a reduction of £6 off household energy bills next year and £5 the year after.

By 2017, DECC hopes that this will deliver as much as 79 TWh of renewable electricity per annum in the UK, 11 TWh more than at present, which still not enough, just 74%, of the 108TWh of electricity needed to meet the UK’s 2020 renewable energy target.

The Renewables Obligation is the Government’s main mechanism for supporting large-scale renewables, and the review covers the final period of support, 2013-17 (2014-17 for offshore wind), before the scheme ends.

The announcement comes ahead of the Government's Global Investment Conference and series of 17 business summits taking place at the British Business Embassy at Lancaster House during the upcoming Games, which aim to secure further investment into the UK.

John Cridland, CBI Director-General, welcomed the announcement, saying it “will help to encourage investment into our energy sector, creating jobs and supporting growth". He also thought that "the Government is right that gas should play a crucial role in any future energy mix. We have argued that there is no need for a false choice between renewables, nuclear, gas, and carbon capture and storage. It’s clear from the evidence that we need a diverse supply.”

Support for onshore wind from 2013-17 will be reduced by 10% to 0.9 ROCs, guaranteed until at least 2014 but could change after then if there is a significant change in generation costs.

If there is evidence of significant reduction of generation costs in early 2013, then subsidies will again reduce in April 2014. The Government will also consider how local communities can have more of a say over, and receive greater economic benefit from, hosting onshore wind farms.

Biomass and solar

There will be a new band to support existing coal plant converting to sustainable biomass fuels. This will increase the amount of renewable energy produced at less cost to consumers.

The new enhanced co-firing band will be split into two new bands: mid-range at 0.6 ROCs/MWh, and high-range co-firing at 0.7 ROCs/MWh in 2013/14, rising to 0.9 ROCs/MWh from 2014/15.

This was welcomed by Dorothy Thompson, Chief Executive of Drax, the country's largest coal burning plant, which is in the process of conversion to be able to burn more and more biomass. She said that she is now “confident that we can transform Drax into a predominantly biomass fuelled generator".

Generators will need to burn at least 50% biomass in a unit to be eligible for support. Bioliquids are excluded from this.

There will be a consultation on lowering the support level for standard co-firing to 0.3 ROCs/MWh in 2013/14 and 2014/15, increasing to 0.5 ROCs/MWh from 2015/16.

Support for generation using 100% biomass is to be set at 1.5 ROCs/MWh, degressing to 1.4 ROCs/MWh for new accreditations and additional capacity added after 31 March 2016.

There will be no immediate reduction in support for large-scale solar, but, as with onshore wind, the level will be kept under review. Installations under 5 MW will only be eligible for feed-in tariff support.

New landfill gas generating capacity will not receive any support from 1 April 2013, but new generators using gas wholly from closed landfill sites will be eligible for support at 0.2 ROCs/MWh and electricity generated using new waste heat to power generating capacity will be eligible for 0.1 ROCs/MWh at both existing stations as well as new stations using gas from any landfill site.

The gas bill

In return for this extra 11 TW hours, DECC has given its commitment to a new dash for gas, provided that gas remains cheap.

It will have “a key role in ensuring that we have sufficient capacity both to meet everyday demand and complementing an increasing amount of relatively intermittent and inflexible generation", the DECC statement says. "We do not expect the role of gas to be restricted to providing back up to renewables, and in the longer term we see an important role for gas with CCS."

£500m of grants are being made available for large shallow water gas fields in the UK Continental Shelf, and more information on the Government's strategy will be set out in the Autumn.

The full bill impacts of current bandings and 2013-17 bandings:

Absolute contribution to average household electricity bills of RO support costs under current bands and the revised bands

£2011 prices	2013/14	2014/15	2015/16	2016/17
Current bands	44	47	49	50
Revised bands	38	42	50	53
Difference between revised and current bands	-6	-5	1	3

(Using household electricity demand before the impact of other policies)

Bandings for all technologies:

Table 1 - Bandings under the Renewables Obligation

Renewable electricity technologies	Current support (2012-2013) ROCs per MWh	Post-consultation decisions
		Level of support (ROCs per MWh)	Comment and other changes
Advanced gasification	2	2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17	One ACT band supporting ‘standard’ and ‘advanced’ ACTs at the same ROC level
Advanced pyrolysis
Anaerobic digestion	2	2 in 2013.14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17	Closure of band to new projects at or below 5 MW from 1 April 2013, subject to consultation
Biomass conversion	No current band but 1.5 ROCs under current banding arrangements	1	New band. Unit by unit approach. No energy crops uplift. Change to definition of relevant fossil fuel generating station.
Biomass conversion with CHP	No current band but 2 ROCs under current banding arrangements	1.5 in 2013/14 and 2014/15	New band. Unit by unit approach. No energy crops uplift. Change to the definition of relevant fossil fuel generating station. Close band to new accreditations from 1 April 2015.
Co-firing of biomass (standard)	0.5	Solid and gaseous biomass (less than 50% biomass co-fired in a unit): 0.3 (proposed) in 2013/14 and 2014/15; 0.5 from 2015/16.	Unit by unit approach. ROC levels in 2013/14 and 2014/15 subject to further consultation.
		Bioliquids (less than 100% biomass co-fired in a unit): 0.3 (proposed) in 2013/14 and 2014/15; 0.5 from 2015/16.
Co-firing of biomass (enhanced)	No current band but 0.5 ROCs under current banding arrangements	Mid-range co-firing (50-less than 85%): 0.6	New band. Unit by unit approach. Excludes bioliquids (other than energy crops). Cost control mechanism to be introduced, subject to consultation
		High-range co-firing (85-less than 100%): 0.7 in 2013/14; 0.9 from 2014/15
Co-firing of biomass with CHP (standard)	1	0.5 ROC uplift in addition to prevailing ROC support available to new accredit-ations until 31 March 2015	Unit by unit approach. Close band to new accreditations from 1 April 2015.
Co-firing of biomass with CHP (enhanced)	No current band but 1 ROC/MWh under current banding arrangements	0.5 ROC uplift in addition to prevailing ROC support available to new accredit-ations until 31 March 2015	New band. Unit by unit approach. Close band to new accreditations from 1 April 2015.
Co-firing of energy crops (standard)	1	0.5 ROC uplift in addition to prevailing ROC support for co-firing of biomass (standard). No uplift available for mid-range or high-range co-firing.	Band to be closed, subject to consult-ation. Unit by unit approach. Changes to definition of energy crops.
Co-firing of energy crops with CHP (standard)	1.5	0.5 ROC uplift in addition to prevailing ROC support for co-firing of energy crops (standard). Band not available for mid-range or high-range co-firing.	Band to be closed, subject to consultation Unit by unit approach. Changes to the definition of energy crops. Close band to new accreditations from 1 April 2015.
Dedicated biomass	1.5	1.5 until 31 March 2016; 1.4 from 1 April 2016	Introduction of a supplier cap, subject to consultation
Dedicated biomass with CHP	2	2 in 2013/14 and 2014/15	Changes proposed to add fossil derived bioliquids, to exclude biomass conversion and to close this band to new accreditations from 1 April 2015
Dedicated energy crops	2	2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17	Changes to the definition of energy crops
Dedicated energy crops with CHP	2	2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17	Changes to the definition of energy crops.
Energy from waste with CHP	1	1	Decision to retain support at current level following consultation
Geothermal	2	2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17
Geopressure	1	1
Hydro-electricity	1	0.7	Closure of band to new projects at or below 5 MW, from 1 April 2013, subject to consultation.
Landfill gas	0.25	0 for open landfill sites	New bands for closed landfill sites and Waste Heat to Power.
		0.2 for closed sites
		0.1 for new Waste Heat to Power band at open and closed sites.
Microgeneration	2	2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17
Offshore wind	2 in 2013/14; 1.5 from 2014/15 onwards	2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17
Onshore wind	1	0.9	Closure of band to new projects at or below 5 MW, from 1 April 2013, subject to consultation
Sewage gas	0.5	0.5
Solar photovoltaic	2	Banding proposals subject to re-consultation. Closure of band to new projects at or below 5 MW, from 1 April 2013, subject to consultation.
Tidal impoundment (range) – tidal barrage (<1GW)	2	2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17
Tidal impoundment (range) – tidal lagoon (<1GW)
Tidal stream	2	5  up to a 30 MW project cap. 2 above the cap.
Wave
Standard gasification	1	2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17	One ACT band supporting ‘standard’ and ‘advanced’ ACTs at the same ROC level
Standard pyrolysis

Alongside publication of the banding review results, DECC has also published an assessment of how incineration of waste to produce energy and heat can be made more efficient.

DECC has not yet published its impact assessment.

Areva/EDF's nuclear ambitions are in disarray

Areva's European Pressurised Reactor Olkiluoto 3 is now over five years behind schedule. Its design faces 28 unanswered questions from the UK regulator.

EDF and Areva are facing delays, high costs, and problems satisfying the regulator, over trying to get their flagship European Pressurised Reactor nuclear plant design approved for building in the UK, even as EDF seeks a £165/MWh price guarantee from the Government.

The two companies have resolved just three of the 31 problems blocking their proposed nuclear reactor from receiving environmental and safety approval from the Environment Agency and the Office of Nuclear Regulation (ONR).

They are greatly behind schedule and will not receive final approval this year, as they had hoped.

Their design for a new generation European Pressurised Reactor (EPR) has to pass through the generic design assessment (GDA) process before any reactors can be built.

EDF is hoping to use two of the reactors in a 3.2 gigawatt plant at Hinkley Point, Somerset.

Meanwhile, it is seeking a subsidy in the form of a guaranteed price of £165 per megawatt hour (MWh) for electricity from the plant from the Department for Energy and Climate Change (DECC) and the Treasury, according to the Times newspaper.

This expensive figure is more than the £150/MWh strike price estimated by Dr. David Toke, Senior Lecturer in Energy Policy at the University of Birmingham, and about the same as a £166/MWh estimate by Citi bank analyst, Peter Atherton.

The EPR design was given interim approval by the ONR and the Environment Agency last December but EDF has to come up with answers to 31 separate questions.

They cover issues such as security, reliability, strength of the inner containment wall, test results, and independent assessment of predictive calculations.

Significantly, the report says: “some of the deliverables have been late or did not provide the required quality of arguments or evidence".

It adds: "a number of the metrics are amber or red, indicating that, if no action is taken to improve matters, it is unlikely that the GDA [Generic Design Approval] Issues will be closed-out on the timescales indicated in the current resolution plans", in other words that the design will receive approval by November. EDF and Areva are reviewing their timescales and a new date will be announced shortly.

ONR takes a while to make its progress reports publicly available. Although published on July 5, the latest quarterly report actually covers the three months up to March 31. The reports are not easy to find on the website, especially because a link leading to them is broken.

The EPR is now the only reactor design being assessed following Westinghouse's withdrawal from the market with its AP1000 reactor design.

More EPR delays

To add to the two French companies' woes, the reactor being built by Areva in Finland, the 1,600 megawatt Olkiluoto 3, will now “not be ready for a normal level of electricity production in 2014" according to a statement issued on Monday by Areva's partner, the Finnish utility Teollisuuden Voima Oyj (TVO). TVO adds, dryly: “we are not pleased with the situation".

It was supposed to have been ready in 2009, and last year TVO said it would start in 2014. It is more than €2 billion over budget. TVO is locked in a bitter legal wrangle with Areva.

There are similar delays and cost overruns at Areva's EPR project in Flamanville, France.

The nuclear subsidy dilemma

Under the draft Energy Bill, the Government will introduce ‘contracts for difference’, a tariff system intended to subsidise renewables, nuclear, and carbon capture and storage. But it will not be in place until 2014, two years after EDF says it needs to make an investment decision on the Hinkley Point plant.

The EPR clearly is much more expensive than EDF had originally said publicly. The Government has repeatedly said it is committed to nuclear power.

Offshore wind power is currently subsidised at a price of £130 per MWh under the Renewables Obligation Commitment. The Secretary of State, Ed Davey told the House of Commons Select Committee on Energy and Climate Change yesterday that details of changes to the Renewables Obligation Commitment subsidy levels, which had been expected to include a reduction in this subsidy and were anticipated this week, have been delayed due to pressure of time impacting on his department’s discussions with the Treasury and other departments.

He said “there are over 4,000 responses to the consultation, and it is very complicated”. Pressed by MPs, he said an announcement will be made by the end of September. He also denied that there was any outside interference in the decision-making process.

Regarding the issue of a subsidy for nuclear power, Ed Davey, is on record as saying: “There will be no levy, direct payment or market support for electricity supplied or capacity provided by a private sector new nuclear operator, unless similar support is also made available more widely to other types of generation.

"I want to make clear … that this means that nuclear will not receive a higher price than comparable generation technologies whether they be renewables or indeed gas generation, once its emissions have been abated by carbon capture and storage.”

Watered down Energy Efficiency Directive still represents a "step change"

Martin Lidegaard, Denmark's energy and climate minister, a keen cyclist, says: "It’s only 17% because that was possible to get"

Britain helped to water down the final text of the Energy Efficiency Directive being finalised today, which will set a new legal target of 17% reductions in energy use by 2020.

Martin Lidegaard, Denmark's energy and climate minister, will today present the final text of the Energy Efficiency Directive (EED), to the Energy Council meeting for ratification.

The European Parliament, the Council and the EU Commission reached a political agreement on the Energy Efficiency Directive yesterday. Today, the Permanent Representatives Committee or Coreper approved it. The European Parliament and the Council still need to give their approval.

If it does, it will be the first time ever that Europe has had a mandatory energy efficiency target.

Securing this has been the Danish Presidency's flagship project during its six-month term, which concludes at the end of this month, and it is pleased to get a resolution. However it is disappointed that the target for reducing Europe's energy consumption will be set at 17% rather than 20% as originally hoped.

In a statement, the European Commission said: “The cheapest energy is the one we do not consume. The countdown to achieve Europe's 20% energy efficiency target for 2020 has started. Without the Energy Efficiency Directive, Europe would only achieve approximately 10% out of 2020. With the legally binding measures introduced by the energy efficiency directive, it is estimated that the EU could reach approximately 17%."

"There have been tough negotiations," commented Lidegaard. “It’s only 17% because that was possible to get. We fought like lions. We started at 13%, and now we have 17%, and that is actually something we are proud of,” Lidegaard said. Since it is a minimum directive, member states can actually go further than 17%.

What the Directive says

The main core of the compromise final Directive is an obligation on energy companies to help their customers save energy. The industry and the energy sector will have a shared responsibility to deliver concrete savings in, for example, energy production, particularly through co-generation and district heating, through building insulation and using energy efficient appliances.

The Directive also requires the public sector to take the lead in the form of requirements for the renovation of state buildings and the promotion of green public procurement.

Under the Directive, Member States must also develop long term renovation strategies for the whole building stock, including policies to stimulate deep renovations.

Its opponents have charged that it could impede growth and that there is no money during the economic crisis to invest in the technology required to save money in the longer term.

Climate Commissioner Connie Hedegaard was today putting a brave face on the deal: "Although the Commission wanted to go much further with our proposal, this deal is an important step forward in our climate efforts," she said.

"The directive will help reduce our dependence on imported fossil fuels, for which the EU paid EUR 573 billion last year, and also create hundreds of thousands of local jobs in Europe. Now it is up to Member States to deliver, and bridge the gap between what was agreed yesterday and our 20% energy efficiency objective."

If all foreseen energy efficiency measures can be implemented within the next decade, every household in Europe could save up to € 1,000 every year.

"This is a big step ahead," Energy Commissioner Günther Oettinger affirmed. "For the very first time we have legally binding energy efficiency measures. Europe is now much better placed to achieve its 20% energy efficiency target for 2020."

But commentators said that instead it is likely to lead to energy savings of 15%.

Britain weakened the Directive

EU sources said it was Britain, not Poland, which was the final obstacle to an improved deal, as it tried at the last moment to weaken a core target.

In the original proposal, utilities were to deliver energy savings equivalent to 1.5% of annual sales from 2014 to 2020. But even after member states had reduced this closer to 1%, British negotiators demanded an amendment that would mean savings from four years before and three years afterwards could be taken into account, which has the effect of exempting it from taking any further action.

WWF-UK criticised the government for "cynically undermining" the Directive, saying that it had "effectively scuppered" the potential for energy savings across Europe.

Friends of the Earth energy campaigner Dave Timms said this was achieved "by opposing an overall binding energy saving target and, at the last minute, insisting on loopholes so it could claim credit for old policies as a way of meeting its future obligation.

"Undermining European efforts to promote energy efficiency while proclaiming the benefits at home is both dishonest and damaging, especially from a self-proclaimed 'greenest government ever'."

The British representation in Brussels declined to comment, but the UK energy secretary, Ed Davey was yesterday claiming credit for the UK in taking a "central role in not only brokering a deal but also increasing its ambition".

"It signals a step change in energy efficiency and for the first time sets legally binding energy saving targets," he said.

"Our experience of our own energy efficiency policies has helped ensure that the Directive promotes practical and cost-effective action that will deliver real savings – and that it strikes the right balance between prescription and the flexibility necessary to allow for national circumstances and for innovative policy approaches.

"The UK supported the move to ambitious, binding, energy saving targets throughout the negotiations and played a crucial role in defining this target so that progress can be clearly and effectively demonstrated."

But Erica Hope from Climate Action Network Europe, said: "Governments have let energy companies off the hook by forcing through a number of exemptions. The Commission must follow-up on this to ensure efficiency measures remain as effective as possible and to prevent abuse of exemptions".

Where the Directive will fail

Paolo Di Stefano of the Coalition for Energy Savings Coalition for Energy Savings (CES) said "The coalition's Gapometer shows that the deal for a Directive would only close half of the gap to the EU’s 20% energy savings target for 2020, as many efficiency measures proposed by Parliament have been watered down significantly".

This half is around 190 Mtoe [mega-tonnes of oil equivalent] of the EU energy saving target of 368 Mtoe by 2020. The coalition calculates that the text agreed would realise around 15% savings by 2020 as follows:

• Most savings result from the annual savings under the efficiency obligations schemes; these will be reduced by up to 25% if actions be for 2014 are taken into account


• Requirements for renovating public buildings and procurement have been limited to central, rather than local, government, which significantly reduces their impact


• Auditing is mandatory, but metering and billing information is now largely voluntary.

"The restriction of public building renovation and procurement obligations to central government reduces them to mere symbolism," commented Jan te Bos, director general of Eurima and Chair of the CES.

New EU efficiency measures in the pipeline, like improved eco-design for boilers and water heaters, or planned, like new CO2 standards for cars, can help to further reduce the gap.

Opportunities for a new business model

Claude Turmes, a Green member of the European Parliament, who has led the parliamentary contribution to the legislation, nevertheless said it represented progress: "We are changing the business model. The future business model of energy companies would also be energy efficiency service business. This is about a cultural business model change and that is why the fight is so brutal."

The cogeneration sector sees opportunities: "With this deal [member states] will not only have to reassess the economic potential for CHP [combined heat and power plants] but will also have to put forward measures to trigger investment decisions," said Fiona Riddoch, Managing Director of COGEN Europe.

The requirements for CHP and improving the efficiency of the energy system are slightly improved over existing rules.

"A competitive market is much better than a regulated market, it is faster and cheaper,” Claus Fest of RWE Effizienz GmbH in Germany told a workshop organised by industry group Eurelectric. “We don’t need anyone to tell us to do energy efficiency, we are doing it right now."

Yet, “the only problem is that we have tried this approach before with the Energy Services Directive, but it didn't work,” countered Brook Riley of Friends of the Earth Europe.

The Prince of Wales's EU Corporate Leaders Group on Climate Change (EU CLG), which represents companies including Alstom, Tesco, Unilever, Philips, Kingfisher and United Technologies, said: “The Energy Efficiency Directive strikes the right balance: it does not place unnecessary or burdensome regulations on businesses, especially where those measures already exist at the national level. Those countries that question the rationale for the Energy Efficiency Directive should think about the impact of doing nothing."

Fatih Birol, the chief economist of the International Energy Agency, repeated his call to EU countries to cease the "absurd" strategies they use to subsidise fossil fuels and adopt the Directive. “Not to push the energy efficiency measures is another way of asking for higher emissions, higher energy import bills and higher energy insecurity," Birol said.

"We all have to push the energy efficiency measures throughout the energy supply chain,” he said. “Europe being a champion of climate change [policies], it needs also to be a champion of energy efficiency.”

"I think member states still have their heads in the sand. The [European] Parliament is doing what it can to oblige member states to face reality and recognise the benefits. But I think the Council will move,” Riley said.

In 2014, the Commission will assess national targets and there will be further measures. In 2016 there will be a review of progress towards the 2020 obligations.

FITs reductions get mixed reaction from renewables industry

One installer says the new proposals "could spell Armageddon for the industry".

The solar industry has responded with mixed feelings to DECC's new proposed changes to the Feed-In Tariff system for small scale renewable energy, announced yesterday.

In its response to the consultation on FITs for solar PV, the Government admits that 81% of respondents disagreed with their proposed reduced tariffs for solar PV installations and with the proposed reference date of 12 December 2011, compared to 12% who agreed.

Nevertheless, it is proceeding with the tariff reductions, and the appeal to the Supreme Court over the legality of the cut-off date for the high tariff rate.

The new tariff rate includes a drop to 21p/kWh for systems under 4kW, until June 30. It estimates the cost to taxpayers of all the new tariffs to be ￡1.2 billion over 25 years.

The reductions are based on research showing that the average cost of a 2.6kW system has dropped from ￡15,000 in 2010 to ￡12,000 in 2012. They aim to provide an approximate 5% rate of return to their owners for well located installations.

DECC projects around six million installations by 2020 based on the new tariffs, which over their lifetime will involve total costs, the Impact Assessment says, of ￡54.3 billion. [Note: the document contains several errors so this figure, high as it seems, may not be correct.]

Nevertheless, the Impact Assessment calculates a net benefit of around ￡400 million because the savings on social costs outweigh the overall costs, compared to a loss of ￡600 million under the original scenario.

The response does contain a concession to objectors from the solar industry: that the energy efficiency requirement that will be a condition of receiving FIT support should be based on an Energy Performance Certificate (EPC) rating of level ‘D’ or above, not the more stringent level ‘C’, as previously mooted, as this excluded too many homes.

Even so, it will almost certainly exclude the majority of old, solid-walled homes, that do not have wall insulation. DECC estimates that about half of all properties are already at the ‘D’ rating level.

A second concession is that the threshold at which the multi-installation tariff rates would apply has been increased from more than one PV installation to over twenty five. These rates are set at 80% of the standard tariffs to reflect the economies of scale gained from tackling several roofs at once.

Individuals or organisations with 25 or fewer installations will still be eligible for the individual rate.

"This will help community groups, small businesses and councils who do not benefit from the economies of scale that larger aggregators can obtain," said Energy Secretary Ed Davey.

DECC says it is using budget flexibility to cover the overspend resulting from high PV uptake of 240,000 installations over the last year, while still allowing ￡460 million for new installations over the Spending Review period.

The statement says this will not impact any further on consumer bills, since DECC is juggling overspends and underspends in the overall amount allocated to it for renewables under the Comprehensive Spending Review between the budgets for FITs, the Renewables Obligation, and the Warm Home Discount.

What happens beyond June?

A new consultation is beginning, and it is this which so far appears to be the most disheartening for the solar industry, for it proposes a reduction of 10% of solar PV tariffs every six months, with an added deployment trigger to ensure that subsidy levels keep in step with the market.

It is based on projections which estimate that system costs will fall by two thirds by 2020.

The proposals would make the tariffs from 1 July onwards dependent on the levels of actual deployment of new eligible installations seen in March and April.

They outline three ways of calculating the level, which could bring rates down as low as 13.6p/kWh for installations below or equal to 4kW.

This structure is aimed at protecting the scheme's budget and creating long term certainty for consumers and investors about what the FIT rates will be.

However, one installer said this "could spell Armageddon for the industry. Yet again the Government, even with a newly appointed Energy Secretary in Ed Davey, seem happy to watch the solar industry lurch from one crisis to the next," said David Hunt, a director with Eco Environments.

Friends of the Earth's Executive Director Andy Atkins also said that the "distinctly unclear solar road map leaves a dark cloud hanging over thousands of jobs".

But others welcomed the news.

Robert Goss, Managing Director of Conergy UK, called it "a very good day for British solar. There will be a boom in May and June as people look to complete installations before the June tariff reduction, with returns of seven to nine percent".

A spokesperson for Good Energy said they considered this "a step forward".

"The industry was in desperate need of more clarity and the government has moved to provide that," said its CEO, Juliet Davenport. "The rate changes proposed for solar PV are a reflection of the well-known problems with the FIT budget and it will take time to fully digest what they mean."

Ed Davey said the proposals, "will remove the need for emergency reviews, consistent with our commitment to a stable, predictable future for solar PV and for the whole FITs scheme.

"It will also help to keep the long-term costs of supporting solar PV down, increasing the number of people able to benefit from FITs over time," he added.

The consultation closes on 3 April.

Other FIT technologies

A further consultation has been launched on tariffs for technologies other than PV, including potential arrangements for community projects.

Significantly, it proposes an increase in the rate of return available for micro-combined heat and power, as ministers believe this could bring multiple benefits.

It also outlines potential tariff guarantees for wind, anaerobic digestion and hydro projects, to provide greater certainty about what rates of return they will receive.

This was welcomed by Don Leiper, Director of New Business at E.ON, which has been investing for a few years in micro-CHP for the home market.

He called it "a key step towards building a mass market for what is a smarter home heating and power solution that can save customers money and contribute to saving the planet".

E.ON calculates that under the new Feed-in Tariff scheme, homeowners installing microCHP could see financial savings of more than ￡600 per year, including electricity savings of ￡194 and export payments of ￡46.

This consultation closes on 26 April.

Concluding the announcements, Climate Change Minister Greg Barker said: “Our new plans will see almost two and a half times more installations than originally projected by 2015 which is good news for the sustainable growth of the industry.

"We are proposing a more predictable and transparent scheme as the costs of technologies fall, ensuring a long term, predictable rate of return that will closely track changes in prices and deployment."

The impact of the FIT cuts on solar have captured the headlines, but they have also affected small wind power installations.

Trade association RenewableUK said tariffs for these have been slashed by over 40%, while farm and small business-scale turbines have seen cuts of over a quarter, and it expressed anxiety over the possible impact on jobs.

Story: David Thorpe, News Editor