Nuclear, renewables and CCS unite to demand decarbonisation target

In what is being hailed as a significant and unprecedented move, the three leading low carbon energy trade bodies have today joined forces to urge the government to beef up its proposed Energy Bill with the inclusion of a decarbonisation target for the power sector.

The chief executives of RenewableUK, the Nuclear Industries Association, and the Carbon Capture and Storage Association (CCSA) have written to energy and climate change secretary Ed Davey, as well as the prime minister, deputy prime minister, and chancellor, declaring their support for the government’s imminent Energy Bill.

The letter, a copy of which has been seen by BusinessGreen, endorses the government’s belief that “a diverse energy mix is likely to be the most cost-effective pathway to largely decarbonising the power sector”, and predicts the proposed reforms will deliver the multi-billion surge in new energy investment necessary.

However, in a move that is designed to influence 11th-hour negotiations about the precise content of the bill, the groups declare that they “support the recommendation by the Committee on Climate Change that the power sector will need to be largely decarbonised by 2030 if the UK is to meet its long-term emissions targets”.

“If a reference were included in the Energy Bill to this objective, this would not only reassure potential investors by lowering the perceived political risks, but could also reduce the cost of capital for decarbonising the power sector,” the letter states. “We therefore believe that this could be very important for investment going forward.”

The call is likely to anger the Treasury, which is understood to have been arguing against the inclusion of a binding target on the grounds that it could undermine investment in new gas infrastructure. But at the same time it further strengthens the position of senior Lib Dems and green-minded Tories, who have been pushing for the inclusion of a “flexible” decarbonisation target in the bill.

The so-called quad of senior ministers is expected to meet this week for a second time to discuss the final details of the bill ahead of its release later this month. However, reports over the weekend suggested that the Department of Energy and Climate Change (DECC) and the Treasury remain at loggerheads over a number of key issues, including the vexed topic of the decarbonisation target.

The trade groups, which together represent over 1,000 companies, including many of the UK’s largest energy and engineering firms, today urge ministers to end the stand-off as quickly as possible and ensure the Energy Bill is published this month, as promised.

“It is… essential that the Energy Bill should proceed without delay, with Royal Assent as early as possible in 2013,” the letter states. “Any significant slippage could result in investment being postponed, with major implications for associated new industrial development and jobs in a high-tech, high-growth sector.”

The letter comes on the same day as the Financial Times reported that the UK’s successful offshore wind energy industry is facing a crippling investment freeze, as a result of continued uncertainty over the Energy Bill and planning delays.

The paper reported that the three leading manufacturers of offshore wind turbines have received just one order between them this year from UK projects, despite the country boasting the world’s largest offshore wind industry.

Renewable energy groups are increasingly concerned about the prospects of a hiatus in new projects around 2017 when the current subsidy regime is phased out to be replaced by the policy framework set out in the Energy Bill.

With some large projects likely to take upwards of four years in planning, some campaigners are arguing that an extension of the current Renewables Obligation mechanism out to 2020 may be required if a hiatus is to be avoided, particularly if the Energy Bill faces further delays.

Responding to today’s letter, a spokesman for DECC hailed the intervention as “a welcome vote of confidence in our proposals”, adding that the department intended to introduce the bill to parliament this month.

“We are currently considering the pros and cons of setting a decarbonisation target,” he said. “Energy secretary Edward Davey has signalled his support for having a target. As he told the CBI in a recent speech: ‘A strong case has been made by many investors in energy infrastructure for a decarbonisation target range for the power sector. Such a range would make clear our continued commitment to our climate goals.’”

The letter was also hailed as significant by green groups, given that it represents a relatively rare incidence of co-operation between low carbon energy sources that have historically been known to lobby against each other.

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