Energy minister Ed Davey has officially unveiled the Energy Bill today in parliament.
Although details were revealed earlier in the week, it is now confirmed that renewable energy subsidy will rise by almost two third from £3bn to £7.6bn a year by 2020.
The aim of the bill is to facilitate the move away from fossil fuels as traditional coal-fired power stations reach the end of their lifespan by the end of the decade. Cleaner forms of energy will fill the generation gap at an estimated cost of £110bn.
The increase in subsidy will be paid for through higher consumer energy bills which DECC estimates will need to rise by £95 by 2020. The measures will save money in the long run, however, by reducing our exposure to volatile global gas prices which the International Energy Agency expects to rise by 40 percent by 2020.
Although no legally binding carbon reduction targets are included in the bill, provision has been made to review this in 2016.
Other elements of the legislation include the introduction of Contracts for Difference to stabilise the revenues of low carbon electricity generators by fixing the price paid for the energy they produce. This should reassure investors in projects involving large upfront capital costs.
Trade associations have broadly met the bill with open arms as a welcome boost to renewable energy deployment.
STA PV specialist Ray Noble said: “Solar could readily deliver a third of the UK’s power supply, using south-facing roofs and facades alone. This technology will be massive. Furthermore solar puts the power to generate directly in the hands of millions, not the few. DECC and its Electricity Market Reform agenda now need to fully recognise the major role that solar power will play in transforming our electricity markets.
“The approach so far has been top down. Solar power means a bottom-up energy revolution and any government serious about breaking open the electricity market to much greater consumer choice and competition should be right behind us.”
Angela Knight CBE, chief executive of Energy UK, said: “This means that the huge investment will now start being made in our energy infrastructure and this will create jobs and help economic recovery. At the same time, a focus on affordability for households and for businesses of all sizes, now and during these changes, is essential.”
REA Chief Executive Gaynor Hartnell said: “If the new regime is implemented sensitively, consumers and green generators should both win. Electricity customers will only pay what is necessary to move the UK towards a more sustainable and secure energy future. That’s because, with these new contracts, if the price of electricity increases, the amount of subsidy required can fall. Generators should get a stable price, provided they achieve the fair market price for their electricity. That’s why it’s essential we have a route to market which guarantees this.”