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Ed Davey tries to stamp out Energy Bill “myths”

The Energy Bill has come in for quite a lot of criticism since its triumphant announcement, so it’s not a huge surprise to see Ed Davey, the Secretary of State for Energy and Climate Change, defending it.

In an article entitled ‘Keeping the lights on, bills down and the air clean’ Mr Davey says:

“Seven months in as Secretary of State and I’m more aware than anyone that the energy and climate change agenda raises passions. It goes right to the heart of what we all hold dear – how we power our economy, how we lead our lives and the state of the planet we live on.

“These are long term challenges that demand long term action. That’s why the forthcoming Energy Bill is so crucial. Few things can be more important than keeping the lights on, bills down and the air clean.

“The reforms are designed to address a basic problem in our energy system: demand for electricity is projected to rise, but a fifth of our power plants are closing.

“In the next ten years, we must secure some £110 billion of investment in electricity infrastructure. That investment must go into low-carbon supplies, so that we can meet our legally binding targets. To give you a sense of scale, £110bn is 7 times the investment Crossrail will bring to London; or every year until 2020 it’s like building 20 Olympic Stadiums.”

So far, so rousing.

Davey goes on to acknowledge that the Bill has been subject to some criticism, but says that this is down to “misconceptions” rather than fundamentals.

To counteract these “misconceptions”, the Secretary of State identifies and attempts to explain away five “myths” about the Energy Bill:

1. It’s too complicated

One criticism is that the Energy Bill is too complicated to attract investment, in particular contracts for difference or CfDs. Mr Davey insists that feed-in tariffs with CfDs will be trusted by investors and provide predictable revenue streams citing the success of similar ‘proven’ models as used in Canada, the Netherlands and Denmark.

2. It’s too statist

A second criticism is that the Energy Bill involves too much market intervention by the government. In response, Mr Davey says that the case for intervention is absolutely necessary because the market has “failed to properly account for carbon emissions”. He adds that this interventionist stance is a temporary one in order to provide the framework to enable the move away from intervention, and “blaze a trail towards competition”.

3. It’s a nuclear subsidy in disguise.

The Electricity Market Reform section of the Bill has been accused of being a stealth subsidy for nuclear generation. According to Mr Davey, while nuclear has an important part to play in the national fuel mix, it’s down to private companies to build or decommission nuclear power stations, and there will be no public subsidy for new nuclear power, importantly this claim is caveated by the rider of beyond anything that’s made available for other types of low-carbon generation.

4. It’s only going to make the Big 6 bigger.

It’s also been said that the Energy Bill won’t help to make the make the market more competitive. In reply to this, Mr Davey says in fact it’s a key aim of the reforms to encourage new entrants and new sources of finance to enable them to operate and compete effectively. Davey says that DECC is working with Ofgem to “strip away barriers to entry” and help new suppliers enter the market.

5. It’s unnecessary, because there are better ways of achieving our aims.

The final myth, according to the Secretary of State, is that there are “better, cheaper, easier ways of securing investment, cutting carbon and keeping the lights on” and that a vast quantities of cheap gas will solve all our problems. Mr Davey says that he’s “not ideologically wedded to any energy source” and that we need to remember that gas has a carbon impact and is also subject to volatile price changes, so it must be used alongside renewables, nuclear and other low carbon sources.

Overall then:

  • It is complicated, but others have done it so it at least should work
  • It is interventionist, but only until it doesn’t need to be interventionist any more
  • It is a subsidy for new generation, but only on a level playing field of subsidy
  • It isn’t a charter for Big 6 dominance, but it only hopes to encourage new entrants with Ofgem’s help
  • It isn’t better, cheaper and easier than other options, but it does intend to promote a genuine mix of fuel sources regardless of cost


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