The government has pledged to provide a £7.6bn investment package for the renewable energy sector in newly-published details of the forthcoming Energy Bill.
The large financial commitment will be provided between 2015-2020 as the UK looks to replace ageing fossil-fuel fired power stations with new low carbon generating capacity. Energy secretary Ed Davey says the reforms will give investors the certainty they need to bring in the £110bn which is needed to keep the lights on into 2020 and beyond.
He 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 introduct 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 investment required to keep the lights on and bills affordable for consumers.”
In addition to the cash support, other key elements of the Energy Bill include:
– The creation of a government-owned company to act as a single counterparty to give investors confidence to enter into new long term Contracts for Difference for low carbon electricity projects.
-Powers to introduce a capacity market, allowing for capacity auctions from 2014 for delivery of capacity in the winter of 2018/19, if needed, to help ensure the lights stay on even at times of peak demand. The government is also seeking to provide certainty to gas investors and a Gas Generation Strategy will be published alongside the chancellor’s Autumn Statement.
-An amendment during passage of the Bill to take powers to set a decarbonisation target range for 2030 in secondary legislation. A decision to exercise this power will be taken once the Climate Change Committee has provided advice in 2016 on the 5th Carbon Budget which covers the corresponding period.
The absense of any legally binding carbon reduction targets for the generation sector has been met with disappointment by many, although provisions are contained in the Bill for parliament to decide in 2016 whether to impose a target at a later date.