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Ed Davey tells CBI: Coalition will unlock energy investment

Energy consent process to be made more flexible Ministers to consider introducing additional powers to the Energy Bill to help promote …

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
  • Energy consent process to be made more flexible
  • Ministers to consider introducing additional powers to the Energy Bill to help promote competition and liquidity
  • Government to provide further certainty to investors
  • Ministers to set out options shortly on measures to encourage demand reduction

Ed Davey today assured businesses that the Government will provide the certainty investors are looking for in its forthcoming Energy Bill, which will unlock billions in energy infrastructure investment vital for keeping the lights on, emissions down and bills affordable.

In a speech hosted by the CBI, the Energy and Climate Change Secretary told senior figures in the energy and other industrial sectors:

“Low carbon is a fast growing sector, where we know there are shovel-ready projects ready to create jobs and inject investment into local economies up and down the UK. This vital infrastructure will power our economy and keep energy affordable for decades to come.

“The coalition is absolutely committed to getting these reforms right, through legislation and through the signals we send.  We have listened to investors and today have set out further measures to provide the certainty they need to make decisions that will benefit us all.” 

Saying he wants Britain to be the best place in the world to invest in new, clean energy infrastructure, Mr Davey set out how energy projects will benefit from reforms contained within both the Growth and Infrastructure Bill, introduced today, as well as the  forthcoming Energy Bill.
The Growth and Infrastructure Bill was today introduced to:

  • Unlock investment decisions across a range of technologies, bringing thousands of new jobs and billions of pounds of investment to the UK economy, through an amendment to Section 36 of the Electricity Act 1986. Currently, developers can be held back from improving their plans because they have no way to vary consents. So, for instance, if a developer wants to incorporate the most recent technology and design to increase energy efficiency, they may be prevented from doing so. This is stopping developers from being as ambitious and innovative as they would like. An amendment to the Electricity Act will mean that if developers want to apply to change their projects, they will in most cases only need to undertake a 3 month consultation, rather than going through the whole process of applying for consent again. There remain 9 projects awaiting a decision from Ministers under Section 36, and around 30 projects that have consent but have not made a final decision to build.
  • Government will remove an ambiguity to the Gas Act which has prevented Ofgem from launching an innovation competition that could attract £160 million of additional investment into the gas network to make it more efficient.

On the forthcoming Energy Bill, Mr Davey announced that:

  • Government will seek powers in the Energy Bill to give the market certainty on the arrangements concerning Contracts for Difference, in order to demonstrate commitment to supporting new investment.
  • To secure electricity supplies for the long-term and guard against potential blackouts, Government intends to legislate for a Capacity Market - to ensure the right long-term incentives are in place to ensure the UK has reliable electricity capacity.
  • Government is looking closely at the option of introducing backstop powers in to the Energy Bill to promote market liquidity and improve competition for long-term contracts, particularly with independent renewable generators. 
  • Action is underway to provide greater certainty to investors. This includes the publication last week of a call for evidence by National Grid which will help inform how the first strike prices are set for Contracts for Difference. Today, Davey confirmed that after listening investors concerns, he is attracted to the idea of giving developers earlier certainty than previously proposed on the allocation of contracts. As part of this, the Energy Bill will set out the Government’s choice of payment model and the allocation process for CfDs.
  • Davey also said: “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”.  
  • Government will shortly set out ideas to determine measures that can be put in place to drive more permanent reductions in energy demand, alongside an Energy Efficiency Strategy which will also be published this Autumn. 

Notes for Editors

  1. Read Ed Davey’s speech to the CBI
  2. The draft Energy Bill is currently undergoing pre-legislative scrutiny, with the final Bill to be published shortly this Autumn.
  3. National Grid Call for Evidence on CfDs
Published 18 October 2012