UK electricity market reform ‘hiding’ nuclear subsidies, says report

The UK Coalition Government’s planned reform of the electricity market is hiding subsidies to the nuclear industry, says a report out today from the Energy and Climate Change Committee.

The influential parliamentary committee says the Government’s proposed Electricity Market Reform (EMR) will effectively provide subsidies for nuclear generators through new long-term contracts and a carbon floor price.

The new contracts promise to give energy generators a ‘top up’ or ‘feed-in tariff’ when wholesale prices are low, which should benefit low-carbon sources that require higher up-front investment to get off the ground.

But the Committee warns that the contracts could disproportionally favour new nuclear generation, which the Coalition Agreement promised only to allow without Government subsidies.

“Ministers believe that new nuclear could play a key role in keep the lights on and meeting our climate change targets – but they don’t want to own up to supporting it,” says Committee chair Tim Yeo.

He continues that it would be “deeply irresponsible” to skew the reform of the electricity market “simply to save face”.

“The Government must be up front about the support it is giving to nuclear and not hide subsidies in a one-size-fits-all design for long-term energy contracts,” he says.

The UK faces the challenge of having to replace a substantial proportion of its ageing power stations by 2020, while making significant carbon reductions and maintaining energy security.

The EMR is designed to encourage energy generators provide a clean affordable supply, supporting the inclusion of more inflexible and intermittent renewable sources in the energy mix.

But the Committee is concerned that the EMR is too complex and will fail to attract the £100 billion in investment needed to ensure security of supply by 2020 and beyond.

The Committee wants to see a clearly defined target to reduce the carbon intensity of electricity generation of 50 g of CO2 per kilowatt hour by 2030.

The wholesale energy market should also be fundamentally reformed to break up the dominance of the ‘big six’ energy companies, says the report.

“The Government must go back to the drawing board and come up with a more straightforward and coherent set of plans to reform the electricity market,” says Yeo.

Environmental group Friends of the Earth has welcomed the Committee’s findings.

“This report shows the Government's plans are stacked in favour of nuclear power over renewable energy and are so vague they risk locking the UK into a new generation of polluting fossil fuels,” says campaigner Simon Bullock. “David Cameron must heed the advice of its own green advisor and commit to decarbonising UK electricity by 2030.”

For further information:
www.decc.gov.uk
www.parliament.uk/business/committees/committees-archive/ecc/
www.foe.co.uk

16 May 2011

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