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The Energy Bill Is Here!

Key Points and Response

The Energy Bill – the crucial piece of legislation that we’re relying on to keep the lights on and keep carbon emissions down – has finally been published, after months of discussion and speculation.

The key points are:

  • Contracts for Difference (CfDs) – these are intended to reassure investors that they will get a return from funding low-carbon electricity generation projects, which will help ensure the money needed is there to build low carbon infrastructure.
  • Counterparty – a new government-owned company will act as a single point of contact between investors and parties looking for investment from CfDs.
  • Capacity Market – the introduction of a Capacity Market and capacity auctions from 2014 is intended to help ensure that we have enough energy, by acting like an insurance policy against future energy shortages.
  • National Grid – National Grid will be charged with delivering the Electricity Market Reforms, including CfDs and administering the Capacity Market.
  • Final Investment Decision Enabling – a Final Investment Decision (FID) Enabling process is intended to help make sure we get early investment for low-carbon projects and avoid delays.
  • Liquidity – the government will get additional powers so that if necessary, it can promote greater competition and liquidity in the wholesale market.
  • Emissions Performance Standard (EPS) – an Emissions Performance Standard (EPS) is intended to reduce pollution from fossil fuel power stations, by ensuring new coal fired power stations have carbon capture and storage technology.

What they say

Ed Davey, Energy Secretary:

“The Energy Bill will attract investment to bring about a once in a generation transformation of our electricity market, moving from predominantly a fossil-fuel to a diverse low-carbon generation mix.

“This is the culmination of two years’ work in designing a new market-based approach that will deliver certainty for investors and fairness for consumers.

“The challenge is big. Over the next decade, the investment needed to upgrade our energy infrastructure is almost half of the infrastructure investment needed in the UK. This is far more than is taking place in transport, in telecoms, or in water, and dwarfs the investment that was needed for the Olympics or Crossrail.

“The Bill will support the construction of a diverse mix of renewables, new nuclear, gas and CCS, protecting our economy from energy shortfalls and significantly decarbonising our electricity supply by the 2030s as part of global efforts to tackle climate change.

“This is an economic opportunity – there for the taking. It will stimulate supply chains and support jobs in every part of the country, capitalising on our engineering prowess and our natural resources, cementing the UK’s place at the forefront of clean energy development.

“In an era of rising global energy prices, by shifting to more home grown sources of power and by becoming more energy efficient, we can cushion our economy and households from the fluctuations of world gas markets. We intend to underpin this with reforms to the retail market to simplify tariffs and make sure consumers are able to get the best deal for them.”

What we say

James Constant, CEO of Business Juice:

“The potential impact of these increased costs will be a serious concern for businesses. While it’s hard to predict exactly how much the Bill will add, any upward pressure on energy prices will be keenly felt by businesses that are already struggling.

“It is admirable that the government is trying to place a greater importance on carbon reduction, but it’s vital that that this doesn’t have a negative effect on the small businesses that power our economy.”

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