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Government agrees energy policy

The government will allow energy companies to charge up £7.2bn for renewable energy projects as the final details for the upcoming energy bill are agreed this week.

Energy secretary Ed Davey said the announcement was a “durable agreement” which will allow companies to invest and support jobs.

Other key areas agreed was the agreement of the formation of a single government owned counterparty to support the new long term contracts for difference that will support low carbon energy projects such as new nuclear.

The government worried energy companies and investors alike that the new contracts for difference would not be backed by the state.

But a 2030 decarbonisation target was not in the bill and will only be agreed in 2016 after the next election.

“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,” said Davey.

“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.”

Key points of the bill

  • 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. 


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