The substantive policy announcements are summarised below:
· Carbon Reduction Commitment
Government has indicated it will introduce a mandatory emissions trading scheme for the ‘large non-energy intensive’ sector. The threshold for participation, based on electricity consumption, has been doubled from 3,000 MWh/yr to 6,000 MWh/yr – a major concession to industry concerns over the disproportionate administrative burden associated with including smaller firms. January 2010 has been muted as the earliest possible implementation date. Government will consult further on scheme the details in June 2007. Substantive issues such as how auction receipts will be ‘recycled’ and the definition of an ‘organisation’ need to be resolved. In addition, the case for a 6,000 MWh/yr threshold, including a cost-benefit analysis, needs to be presented.
· Review of Climate Change Instruments
A review of the climate change policy framework is due to report in autumn 2007. The primary aim is to ensure there are no unnecessary duplications, inconsistencies or conflicts between key instruments such as EU ETS, CCAs and the CRC. An important issue is the long-term future of the Climate Change Agreements (CCA). The White Paper confirms a commitment to CCAs until March 2013.
· Renewables Obligation
‘Banding’ will be introduced – i.e. skewing financial support towards those technologies further away from commercial viability (e.g. offshore wind, wave and tidal-stream) and away from those technologies that are becoming increasingly competitive (e.g. ‘co-firing’ and landfill gas). In addition, the level of the obligation will be raised to 20% on a guaranteed ‘headroom basis’ – i.e. obligation to ensure it stays ahead of generation levels, up to a maximum of 20%. Further support for renewable energy will be announced, if required, following the outcome of the Member State burden sharing decision regarding the EU’s 20% renewables target.
· Energy Performance Certificates
Government will consult later this year on a requirement to display Energy Performance Certificates in business premises in England and Wales. These Certificates will provide an energy rating (from A to G) for these buildings and will set out what steps can be taken to improve their energy efficiency.
· Carbon Capture & Storage
A regulatory framework for CCS will be consulted on later this year. In addition, the competition to demonstrate commercial scale CCS for power generation, announced in Budget 2007, will be launched in November 2007. The aim being an operational, end-to-end, demonstration project by 2014 with a capacity of at least 300MW and capture/storage rate of at least 90%. No details have been announced regarding the financial support the winner will receive. Arguably, whilst welcome, this is too little, too late. BP recently announced the termination of its carbon capture project at Peterhead power station, citing lack of financial support from government as the reason.
· Research, Development & Demonstration
The White Paper confirmed the summer 2007 establishment the ‘Energy Technologies Institute’ – a joint venture between the public and private sectors devoted to R&D in low carbon technology. Government will commit of up to £550 million over the next decade. Note that this will still leave the UK at the bottom of the G7 league for public R&D support.
· Smart Metering
From 2008 all new household meters will be fitted with real-time displays. Between 2008 and 2010, suppliers will be required to provide all domestic consumers with such meters free on request, Later this year, government will consult on requiring suppliers to “extend” smart metering services to most companies within five years. However, it does not say who would fund this project and the 'smallest business users’ will not be included.
· Skills Gap
Sector Skills Councils are being tasked with identifying the skills gaps in the energy sector and the actions required to address them.
· Consultation on Nuclear Power
A consultation exercise, closing in October 2007, making a case for new nuclear power stations has been launched. Government has re-iterated its preliminary view that, on both security of supply and climate change mitigation grounds, it is in the public interest for the option to be available to private sector developers. Alongside the consultation, work will start on key elements of the potential policy framework on a ‘contingent basis’. Including assessment of reactor designs and options for funding decommissioning and waste management. The aim is to reducing regulatory and planning risks for developers in the event that the consultation concludes in favour of new build.
· Gas Security
The various offshore gas development consent regimes will rationalised to create a single, unified, consent regime. In addition, a new offshore licensing regime will be introduced to facilitate development offshore gas storage facilities. None of the options to improve economic incentives to invest in storage capacity consulted on as part of the Energy Review (e.g. a supplier obligation or a capacity mechanism) were taken forward. Government is basing security of supply on planning reforms, simplified licensing/consent regimes and better provision of information. Residual concern that the underlying security of supply risk based on rising import dependency, static storage-demand ratios and slow progress in market liberalisation in the EU remains.
· Energy Markets Outlook
A new security of supply information and analysis service will be introduced in autumn 2007. Scenario-based supply and demand trends over a fifteen-year horizon will be provided. The information will be delivered in the format of an annual report and a regularly updated website.