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Energy reforms unveiled

Internal Coalition battles over energy policy have resulted in wins and losses for both parties, with customer bills to rise to pay for more renewable energy, but delayed commitments on firm decarbonisation targets.

There has been a perception that Lib Dem energy secretary Ed Davey (pictured above) was pushing for an energy future based on nuclear and renewables to hit emissions targets, and that chancellor George Osborne and the Treasury by contrast wanted gas and shale gas to be the priority.

Davey told BBC Radio 4’s Today programme: “I don’t think it’s gas or renewables. I think we need both, and actually they can be very complementary...I have been very clear and the chancellor has been very clear that shale gas does offer an opportunity to the UK.”

His department, DECC, says that contrary to some media reports quoting figures like £178, bills will actually rise by around £95 (7%) for an average home in 2020.

This is because energy firms will now be allowed to triple the amount they add to customers’ bills to pay for renewable power, nuclear and other environmental measures. But DECC and Davey say that by the end of this decade, the benefits of energy-saving measures and less reliance on expensive and insecure fossil fuel will mean household bills come out lower than they would be without green policies.

Davey said: “This is a durable agreement across the Coalition against which companies can invest and support jobs and our economic recovery.

“The decisions we’ve reached are true to the Coalition Agreement, they mean we can introduce the Energy Bill next week and have essential electricity market reforms up and running by 2014 as planned.

“They will allow us to meet our legally binding carbon reduction and renewable energy obligations and will bring on the investment required to keep the lights on and bills affordable for consumers.”

A decision on the 2030 decarbonisation target has been pushed back to 2016. The Lib Dems and Labour want a target set, but most Conservatives seem opposed.

Greenpeace said that delay was due to Prime Minister David Cameron allowing a “militant tendency” within the Conservatives to derail the bill, because of their climate change scepticism.

Trade body RenewableUK seemed thrilled with the news; it’s chief executive Maria McCaffery, said it proved that there is “rock solid support across Government for renewable energy”, and “clear evidence that Treasury and the Department of Energy and Climate Change are in step”. She that will provide the industry with “exactly the kind of assurances we've been calling for...This blows the last few months of political infighting completely out of the water.”

She added: “This is proof that the Treasury really does get it – the renewable energy industry offers one of our best hopes for economic recovery. This will stimulate billions of pounds worth of investment in renewables, creating more than 88,000 jobs in wind, wave and tidal energy alone by 2021. It will enable us to hit our 2020 renewable energy targets, and make sure renewables can play their part in protecting UK consumers from unstable international power markets.”

Angela Knight CBE, chief executive of Energy UK, which represents the energy industry, said the agreement is “good news”, adding: “We are pleased to see that the Levy Control Framework means that the UK will be building new power stations, including nuclear and renewables. This is a huge investment and must bring forward the jobs and economic growth that the UK needs. A gas generation strategy is also essential and we await the details with interest. Affordability for all customers, both businesses and households, must be at the core of the Government's approach.”

Lord Deben, who chairs the Committee on Climate Change, said: “The agreement on the levy control framework is very positive. This should be sufficient to support investments in renewables required to meet the 2020 EU target and carbon budgets, together with demonstration of CCS and investment in nuclear new build.

“We are disappointed that a carbon intensity target will not be set until the next Parliament. This leaves a high degree of uncertainty for investors and does not address widespread investor concerns raised in recent months; it could adversely impact on supply chain investment and development of projects to come on line after 2020.”

(Image of Ed Davey is Crown Copyright, courtesy DECC, used here under a Creative Commons licence. Some rights reserved.)

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