Ed Davey MP writes…Green jobs, cleaner energy, keeping the lights on and bills down

The Energy Bill returns to the House of Commons tomorrow. It’s a crucial Bill that will help deliver all of the above, but clearly one issue – the 2030 decarbonisation target for the power sector – has been the focus of much attention over the last few months. Let’s be clear, such a target wasn’t mentioned in any party’s manifesto or the Coalition Agreement, or in the draft Bill when I became Secretary of State. But because we won the argument in Government, and the Bill now provides for a target, Britain will be the first country in the world to introduce a power decarbonisation target. So the debate is not around whether we have a target – thanks to the Liberal Democrats we will. The debate is over when it’s set – in 2014 or 2016.

The Bill sets out a plan for it to be agreed in 2016 which makes good sense as it would be made alongside the fifth carbon budget covering the period 2028-2033.  If anyone questions how committed we are to tackling emissions we should remind them that just last week I announced plans to push for an ambitious ‘across the board’ target for a EU-wide 50% cut by 2030 – the most ambitious yet proposed.

The debate around when to set the 2030 de-carbonisation target is understandable, but it should not overshadow the range of other measures in the Bill.

To clean up energy supply and keep the lights on, major reform is needed. The Bill paves the way for Electricity Market Reform (EMR) which will deliver the investment needed to maintain security of supply, meet our renewables and decarbonisation targets, and keep consumer bills down.  EMR essentially introduces two things: Contracts for Difference (CfDs) and the Capacity Market (CM).

CfDs are designed to boost investment in low carbon technologies, including renewables, Carbon Capture and Storage (CCS), and potentially nuclear, by providing certainty to revenue streams,  encouraging investment and finance. The Capacity Market (CM) will ensure ‘the lights stay on’ with a reliable power supply. Supplier incentives will make sure consumers and businesses have the power they need at times of peak demand.  These reforms will also pave the way for £110 billion of private sector investment creating up to 250,000 jobs in the energy sector, and the vast majority of them will be ‘green jobs’ in renewables.

The measures in the Bill are also crucial for consumers at a time when energy bills are increasing. Wholesale energy costs make up around half of the average household energy bill, and rises in these costs have increased bills by around 60% between 2010 and 2012.   We have to reduce our reliance on imported gas, and the measures in the bill pave the way for an increase in ‘home grown’ energy.  Consumers will also get a better deal from energy suppliers and greater protection when there has been wrongdoing. Backstop powers in the Bill will ensure Ofgem’s tariff reforms become a reality and result in consumers on ‘dead tariffs’ being automatically switched to the supplier’s cheapest variable rate. Greater protection will mean if there has been malpractice, Ofgem will now have the power to force energy suppliers to provide consumers with compensation.

This Bill delivers on key Liberal Democrat principles, and paves the way for a green energy and green jobs revolution.

* Ed Davey is the Liberal Democrat MP for Kingston and Surbiton and was Secretary of State for Energy and Climate Change in the coalition government.

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23 Comments

  • Simon McGrath 2nd Jun '13 - 11:36am

    Given that renewable energy is several times more expensive than non renewable how does a shift to renewables keep prices down ?

  • nuclear cockroach 2nd Jun '13 - 12:18pm

    @SM

    Renewable energy is less expensive in the long run – that’s what the experts in the DECC say. And frankly I couldn’t give a damn. The issue concerns the certain damage that climate change will cause, which demands that we stop industrial processes including energy production and transport releasing carbon dioxide into the atmosphere.

  • Why do we have to rely on the EU to investigate price fixing? Sorry Ed but you are not keeping the prices down. There is clearly a cartel.

  • jenny barnes 2nd Jun '13 - 4:51pm

    For generating electricity, the cheapest available energy is coal, and not much dearer is gas. Nuclear is about 30% dearer, as is onshore wind; offshore wind around double. Photovoltaic solar is about 3 times, concentrated solar a bit over double.
    “several times” implies at least 3, and probably more like 6, so it’s misleading.
    With a cost per tonne of $60 for CO2 pollution, Coal and gas are both more expensive than nuclear, and onshore wind power.
    I suppose it all depends on how we value the disbenefit of CO2 emissions. Clearly some people think climate change is a myth (or they would like to “free-ride” on other people’s CO2 savings) others think that CO2 is causing climate change, and would prefer to see less such pollution. Politically it would make sense to set a price per tonne that compromised between those 2 views in proportion to the numbers holding them.

  • jenny barnes 2nd Jun '13 - 4:54pm

    When it comes to domestic energy supply, can we have a single price per unit of electricity, and one for gas, please. None of this standing charge, different rates for the first 1,073 unit or whatever.
    When I go to the garage to buy fuel, they don’t ask me to pay a standing charge first, they sell me fuel at a price per litre for diesel, and a different price for petrol – so it’s easy to compare which is the cheapest.
    With a single price per unit and no standing charge, high users would be paying more for their marginal units than they do now, which would be a good incentive to use less.

  • @jenny – that is the opposite of what is now happening, the regulators are bringing in a standardised standing charge.

  • Simon McGrath 2nd Jun '13 - 5:58pm

    @Cockroach – it may be right that renewable is cheaper in the long run. But it is based on a number of dubious assumptions a) non renewable prices keep rising – they are impossible to predict, have been going down in the US due to fracking b) renewable s get cheaper – again may right, but why not wait until they are, c) there will be heavy taxes on non renewables – which again may be true but is nothing to do with the real costs
    You may be right that we have to switch to renewables. But we should be honest about the costs

  • jenny barnes 2nd Jun '13 - 6:04pm

    gas prices reducing in the US due fracking is largely because 1) much of the gas is coproduced with oil in mixed reservoirs
    2) There are restrictions on exporting gas from the US + no infrastructure to do so ( although Exxon is building a LNG train in texas, I believe) and therefore 3) fossil fuel companies have shedloads of gas that they want to sell at any price. Economics 101 says that will drive the price way down. They’re still making money out of the oil, though.

  • >gas prices reducing in the US due fracking…

    Plus we shouldn’t forget that the market is adjusting as the new frack supplies establish themselves in the market. Expect the price reductions to be a thing of the past within 1~2 years, as fracking needs high prices to recover both it’s production costs and investment – particularly as the companies won’t be able to play the international taxation game…

  • Alex Meredith 3rd Jun '13 - 7:41am

    Ed is right about this one. Deferring the decarbonisation target to 2016 is a good outcome for renewables when considered as part of an Energy Bill that provides £7bn subsidy. There are plenty of other reasons why this push for a target now is folly – I’ve set them out here http://www.brightgreendragon.com. Essentially we do not know enough about the future to drastcally limit our optiobs with a decarbonisation target now, no matter how hard the renewables sector are lobbying.

  • I agree with Ed’s comments here but I do think that more needs to be done to tackle the issue of “fuel poverty” and to publicise those schemes that are available to help people who are on low incomes.

  • Gareth Wilson 3rd Jun '13 - 11:39am

    I believe our desire to ‘appear green’ is clouding our party’s view on fracking. To many of us it just doesn’t ‘feel’ like the right thing to do. But it could be a real boon to our economy – we’re going to be relying on gas for many years to come and I’d rather we were generating jobs and revenue for the UK from our energy expenditure rather than relying on Russia for our supplies

  • jenny barnes 3rd Jun '13 - 3:04pm

    Geoffrey Payne. Oh, I think climate change is real, and caused by CO2. But many, many people don’t. I would far rather have a decent compromise CO2 price – like, say 60 Euro / tonne, which might be a good compromise between what the scientists think * number of people thinking climate change is real, and the number, who don’t, like a recent commenter on Conservative Home, who suggested that we should immediately remove all green subsidies and tariffs because …no actual reason. Current CO2 price on the Euro carbon market is about 2.5 Euro.
    As is often said, the best is the enemy of the good.

  • Simon McGrath 3rd Jun '13 - 11:02pm

    @Henry Adams “And don’t ignore its huge environmental and health impacts…”
    can you point us to any credible sources for this statement ?

  • Simon – When you say “credible sources” here, do you just mean “sources I agree with”? I am increasingly concerned by the term “credible” used in this fashion.

  • @Simon
    Can you point us to any credible sources that say fracking doesn’t have environmental and health impacts?

    Remember, todate all the data concerning fracking, particularly in the UK, shows us that it isn’t really about security of energy supply but more about encouraging economic activity, Hence it is correct that we set the environmental and health and safety bar high.

  • Simon McGrath 4th Jun '13 - 12:40pm

    @Tim, henry and Roland, on what grounds do you diagree with the Report of the Royal Society and the Royal Academy of Engineering that fracking (properly managed) is safe?
    http://royalsociety.org/policy/projects/shale-gas-extraction/report/

  • @Simon
    History and natural caution where the words “properly managed” are used with respect to new technology and commercial interests. Remember the railways may be considered to be “properly managed” but that doesn’t mean there won’t be any accidents…

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