Secretary of State for Wales, David Jones has today welcomed the publication of the Energy Bill which includes reforms to keep consumer energy bills down and create cleaner electricity to help tackle climate change.
The Bill, published today by the Department of Energy and Climate Change (DECC), aims to reform the electricity market to enable large-scale investment in low-carbon generation capacity in the UK and deliver security of supply, in a cost-effective way.
The reforms will ensure that low carbon generation is sufficiently incentivised to ensure new plants are built, to enable the UK to meet its obligations to reduce carbon emissions and increase the use of renewables.
Recognising the important role that energy intensive industries (EII) play in the UK economy, Mr Jones has also welcomed the announcement that EII will be exempt from the costs of Contracts for Difference under the Electricity Markets Reform (ERM). Contracts for Difference are long term contracts that provide stable revenues for investors in low carbon energy projects at a fixed level known as a strike price.
Mr Jones said:
I welcome the publication of this bill which will allow the government to meet its legally binding carbon reduction and renewable energy obligations, and bring on the investment required to create a more diverse energy mix an and make bills affordable for consumers.
Electricity Market Reform (EMR) will ensure that the UK remains a leading destination for investment in low carbon electricity, boosting the economy and driving investment in secure, affordable and low-carbon electricity. This is necessary to attract the investment needed to replace ageing energy infrastructure and meet the projected future increases in electricity demand from the electrification of sectors such as transport and heat.
In such challenging economic times, it is crucial that government does all it can to help encourage our businesses to grow, and to make Wales - and the UK as a whole - an attractive location for industry to invest.
That is why I welcome the fact that the government is seeking to exempt energy intensive industries, like the steel industry, from the costs of Contracts for Difference. As we begin the transition to a Low Carbon economy, we also need to ensure that we create the right conditions so that the most energy-intensive of industries are not put at a disadvantage, and are able to compete in the global marketplace.
“The reforms included in this Energy Bill will be better for the environment, better for consumers and better for our energy security. Crucially, they will also be better for the economy and will transform the provision of energy efficiency and generation in the UK.”
Notes for editors
The Energy Bill aims to bring about a once in a generation transformation of the electricity market from fossil fuel dependent to a more diverse mix including home grown low carbon sources, and in so doing help insulate the UK economy from future global gas prices.
Long term contracts will be agreed with developers of new infrastructure, providing a stable rate of return designed to give certainty and support technologies that are further from the market. The costs will be levied on energy suppliers, who are expected to pass these on to consumers. Exempting Energy Intensive Industries from these costs will help British industry compete internationally, benefiting the UK economy and supporting global emissions reductions
In taking forward the exemption for Energy Intensive Industries, government will establish a framework to ensure that the costs to other consumers are minimised.
The scope of the exemption for energy intensive industries is currently being considered by DECC and BIS, who will run a consultation in 2013 once the proposed exemption has been further developed. The exemption will require state aid clearance from the European Commission.
A separate £250 million scheme to compensate certain energy intensive industries for additional costs associated with the Carbon Price Floor and EU Emissions Trading System is already the subject of a current consultation.