Energy Bill to create ‘low carbon economy’, says Davey

Energy Secretary Ed Davey says the Bill will transform the energy landscape

Energy minister Ed Davey has unveiled the government’s much-trailed Energy Bill, setting out the roadmap for the UK’s switch to “a low-carbon economy”.

Energy companies will increase the amount they levy consumers from £3bn to £7.6bn a year by 2020, potentially increasing household bills by £100.

But big, energy-intensive companies will be exempt from the extra costs of the switch to renewable energy.

The “transformation” will cost the UK £110bn over ten years, Mr Davey said.

He told MPs: “Britain’s energy sector is embarking on a period of exceptional renewal and expansion.

“The scale of the investment required is huge, representing close to half the UK’s total infrastructure investment pipeline.”

The government’s plan formed the “biggest transformation of Britain’s electricity market since privatisation,” he said.

The Energy Bill aims to move the UK’s energy production from a dependence on fossil fuels to a more diverse mix of energy sources, such as wind, nuclear and biomass.

This is to fill the energy gap that will from closing a number of coal and nuclear power stations over the next two decades, and to meet the government’s carbon dioxide emissions targets.

Mr Davey said government policy was “designed specifically to reduce consumer bills”, arguing that without a move to renewable energy, bills would be higher because of a reliance on expensive and volatile gas prices.

Exemptions

But in a statement published alongside the Bill, Mr Davey said energy-intensive industries, such as steel and cement producers, would be exempt from additional costs arising from measures to encourage investment in new low-carbon production.

“Decarbonisation should not mean deindustrialisation”, Mr Davey said.

“The transition to the low carbon economy will depend on products made by energy intensive industries – a wind turbine for example needing steel, cement and high-tech textiles.

“This exemption will ensure the UK retains the industrial capacity to support a low carbon economy.”

Without the exemption, the government fears big companies would cut jobs and relocate abroad.

What is the Renewable Heat Incentive?

The Renewable Heat Incentive (RHI) is a Government scheme that provides financial support to non-domestic renewable heat generators and producers of biomethane.

In its first phase, the RHI only applies to non-domestic systems. In the meantime there is a rebate scheme known as the Renewable Heat Premium Payment that is available for homeowners.

Renewable Heat Premium Payment (RHPP)

Phase 2 – Rewarding renewable heat on domestic installations

The Renewable Heat Premium Payment (RHPP) is a one-off grant to help you meet the cost of installing green heat-generating technologies within your home. It’s here in place of a domestic stream of the RHI, which is yet to be introduced.

Phase 2 of this scheme runs from May 1^st 2012 to March 31^st 2013 (subject to available funding) and includes £300 towards cost-saving Solar Thermal installations, which you can get through Southern Solar.

The RHPP is also available for heat pumps and biomass boilers.

Those who receive the RHPP will still be eligible for RHI funding when this comes in.

There are some eligibility criteria that it is useful to be aware of:

• You must live in England, Scotland or Wales.
• Your installation must not have received funding under phase 1 of the RHPP.
• The installation must have been commissioned on 21^st July 2011 onwards.
• You must own the property and continue to own it for the duration of the metering and survey requirements; or
• If you’re a tenant you must be purchasing the system yourself with permission from the owner of the property.
• If the property is a new-build you must own it after it’s built as either the occupier or the landlord.
• The property must have loft and cavity wall insulation (where practical).
• Planning and environmental permission must be in place if needed.
• The product used and the installer must be MCS or Solar Keymark certified.

Also, how you heat your home currently can make a difference:

• If you’ve recently removed a gas heating system or if the property runs from mains gas heating – you are only able to apply for Solar Thermal RHPP.
• You can apply for the other technologies if you run on oil, liquid gas, solid fuel or electricity.

When does the RHI launch?
The scheme opened for applications on Monday 28 November 2011.

What technologies are included in the scheme?

• Biomass boilers (Including CHP biomass boilers)
• Solar Thermal
• Ground Source Heat Pumps
• Water Source Heat Pumps
• On-Site Biogas combustion
• Deep Geothermal
• Energy from Municipal Solid Waste
• Injection of biomethane into the grid

Key principles of this policy/scheme:
The RHI provides a continuous income stream for twenty years to any organisation that installs an eligible renewable heating system, ensuring that renewable heat is commercially attractive when compared to fossil fuel alternatives. The RHI is important because it will help increase significantly the level of renewable heat produced in the UK, which is key to the UK meeting its renewable energy targets, reducing carbon emissions, ensuring energy security and helping to build a low carbon economy. The RHI will accelerate deployment by providing a financial incentive to generate heat from renewables instead of fossil fuels.

What is it trying to do?

The key objective of the scheme is to increase significantly the level of heat generated from renewable energy sources in Great Britain and thereby enable the UK to meet its binding targets to generate 15% of our energy from renewable sources by 2020.

The Government is committed to the ambition that by 2020, 12 per cent of heating can come from renewable sources.
The Government estimate that the RHI could save up to 44 million tonnes of carbon (MtCO2) by 2020 (and 7 MtCO2 inside the EU(ETS). This works out as a saving of one million tonnes of carbon in the first carbon budget period (2008-2012), 14 million tonnes in the second carbon budget period (2013-2017) and 52 million tonnes in the third budget period (2018-2022).

By 2020, they estimate the RHI support levels are expected to bring forwards around:

• 14,000 installations in industry; and
• 112,000 installations in the commercial and public sector.

These installations are expected to generate around 57TWh of renewable energy.

Are the government going to launch RHI for domestic installs?

YES, and they expect the RHI to deliver those too. But cannot give estimates of numbers as they have not determined how the RHI is going to operate for domestic installations.

Ahead of the introduction of support for domestic installations under Phase 2 of the RHI will be providing a simple one-off payment through the Renewable Heat Premium Payment scheme to cover part of the installation costs for domestic installations.

The level of support varies depending on the type and size of technology. In order to calculate support, the appropriate tariff is multiplied by the eligible heat used.

Eligible Technologies Tariff Table
The current tariff levels are shown in the following table:

Recent Npower and British Gas announcements of yet another energy price hike this winter have sparked anger and concern among consumers. The cost to households (a nearly 20 per cent increase for some) has rapidly become a hot topic for the nation.

Our political elite are worried. That much was clear when David Cameron spontaneously proclaimed to Parliament that his Government would compel energy companies to charge customers their lowest tariff.

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Politicians are right to be concerned about the impact on households. But they should also pay close attention to the effect that our energy choices have on businesses and – as a consequence – our national economic growth.

A few numbers provide a powerful illustration. The price of energy paid by UK businesses has increased 58 per cent since January 2010. Our joint survey of 153 major corporates published in July showed that if energy prices continue to rise at this rate for just another two years, eight per cent would go bankrupt and 31 per cent would have to significantly restructure. 91 per cent of corporate energy users believed that energy prices would rise over the next two years. And what do they attribute it to? Mostly (77 per cent) to anticipated increases in fossil fuel prices – on which we currently rely to meet 60 per cent of our national energy needs. An Oxford Economics study has calculated that a 50 per cent shock price increase would cost the UK one per cent of GDP.

Piece these numbers together, and it is not difficult to see the business case for rapidly building a national energy system that is far less reliant on fossil fuels and imported energy. Businesses understand that the MW cost of generating energy from renewable sources may be higher right now. But this cost constitutes a prudent investment; allowing the nation to hedge against future fossil fuel price volatility and allowing us to benefit from much more certainty about the expense longer term. Too much exposure to fluctuating prices, affected by unpredictable events like the Arab Spring, creates a very risky environment for business.

Major corporates have already made this calculation and are publically showing their hand – most recently in an open letter coordinated by the Aldersgate Group to the Chancellor, calling on Government to make a legal commitment to power sector decarbonisation by 2030. They are seeking to make a straightforward deal with Government: build us an energy system that is secure, reliable and protects us from sudden price volatility in global markets that are beyond national control – and we will do our best to operate profitable businesses that create jobs and help to fund public services.

The Government’s response? The new Energy Minister says “enough is enough”. The Chancellor: “only if our estimate of the levelised cost isn’t too high compared with fossil fuels”. (There has not yet been a formal response to the business letter – but messages being sent through policy decisions is clear).

A case in point is the “Levy Control Framework” – a policy that has enjoyed far less public attention than the 2030 power sector target – but goes right to the heart of the way in which we currently cost our energy choices. Due to be announced in the Autumn statement, the stated intention is to limit energy bill increases by setting a cap on how much energy companies spend on investment in renewables. It will effectively set a cap on the £29 slice of bill increases attributed to environmental regulation from 2004 to 2010; but there is no cap at all on the £290 bill increase attributed to gas price hikes during that period. This cannot be right.

Now, on the eve of the biggest reform of our energy market since the 1970s, it is time to seriously test the assumptions underpinning our economic models, start valuing the risk of those assumptions being wrong, and have a proper national conversation about the true cost of our energy choices.

The energy debate has become the site of a major national contest this Autumn. The resulting decisions will have a critical impact on how we fuel our economy – but are also a test of our ability to think afresh about other national challenges

The financial crisis demonstrated the severe economic consequences of undervaluing systemic risk and where it can leads us. Our imminent energy sector choices will show whether we’re capable of building an economy according to the logic of sustainable growth or whether we’re trapped in a web of short-run calculations based on narrow economic modeling.

The Aldersgate Group is an alliance of leaders from business, politics and society that drives action for sustainable growth

Online campaign aims to boost take-up of solar

The ‘Please Your Plug’ campaign is being launched by Our Solar Future, the campaign first launched to fight cuts to solar subsidies. The latest campaign hopes to reverse flagging figures in solar take-up and is being backed by a number of leading solar companies, including Solarcentury, Southern Solar and Sun Gift Solar.

Those behind the social media campaign are describing it as the “most ambitious renewable energy campaign witnessed by the UK”. However, the campaign still needs to raise £150,000 and is seeking donations from hundreds of solar companies to ensure it can go live.

‘Please your Plug’ is being launched following deep cuts to the Feed-in Tariff (FiT) for solar electricity in the last year. Since August, when the latest cut to solar FiT rates took effect, solar PV installations under 50 kilowatt have fallen dramatically. For the four-week period between August 13th and September 9th, the latest period for which official figures are available, there were just over 3000 installations, a more than nine-fold decrease on the same period last year, when there were almost 13,000 installations.

“As with Ecotricity’s video which attracted over one million views in a matter of weeks, we are hoping our campaign will have similar reach. All that’s needed is for 300 organisations to each contribute £500 to make a real difference to the future of the solar industry,” added Johns.

“It’s been a hard year for solar, but now it’s time to turn things around. There’s a time to complain and there’s a time to get down to growing the market we have by drawing on the positives of this fantastic industry. Good communications will make the difference,” said Charlotte Webster, head of PR firm CleanTech, CCgroug, which is handling communications for the campaign.