Written evidence submitted by EDF Energy
BUDGET 2011
I write in response to your inquiry into this week's
Budget, to briefly set out EDF Energy's position on the key announcements
made.
I would like to focus on two announcements in particular,
the carbon price floor and the funding decisions taken in relation
to the proposed Green Investment Bank.
CARBON PRICE
FLOOR
We welcomed the Chancellor's announcement that the
Government will introduce a floor price for carbon, as a part
of its reforms to drive green investment. The introduction of
a carbon price floor has been discussed widely across industry
with Government for some time, and was a commitment clearly made
under the terms of the Coalition Agreement.
Establishing a carbon floor now, with a clear trajectory,
is a fundamental component of the package of reforms we and other
investors need to move forward with our multibillion pound investment
plans. It is a measure which has been clearly advocated by the
Committee for Climate Change, and it will serve to drive both
decarbonisation and long term economic growth in this country.
We also welcomed the proposed price path announced
yesterday by the Chancellor, such that the carbon price will start
low from April 2013 reaching £30 per tonne of C02
in 2020 (at 2009 prices). This will strike the right balance for
industry and consumers, allowing the gradual strengthening of
the carbon price signal without distorting the market. It will
support security of supply at an important, transitional time,
whilst securing long term affordability.
It will also have a positive impact on existing low
carbon generation, supporting investment in efficiency upgrades,
increased bio-mass co-firing and informing investment decisions
about life extensions for the UK's existing nuclear fleet. In
addition, the announcement in the budget of an increased Climate
Change Agreement discount from 65% to 80%, will ensure that major
energy users in the UK are protected against any increases in
energy prices which may result from the introduction of a floor
price.
As an important part of a wider, coherent package
of market reforms, a carbon price floor should also result in
lower bills in the longer term than would otherwise be the case.
The Treasury's own analysis shows domestic and business bills
stand to be 4% lower in the long term, as a carbon floor will
lead to higher investment in more cost effective low carbon energy
infrastructure.
We have also welcomed the Government's proposal to
introduce the floor price through widening the scope of the existing
Climate Change Levy, an efficient means of delivering the floor
requiring little new legislation.
Through driving investment, a carbon price floor
will help to drive low carbon economic growth, and job creation.
It stands to help get the UK's supply chain prepared to participate
in the multi-trillion pound investment in electricity supply that
will take place internationally over the next couple of decades.
GREEN INVESTMENT
BANK
A Green Investment Bank can also play an important
role in driving investment.
We therefore welcomed the Chancellor's announcement
that an additional £2 billion of capital will be added to
the existing £1 billion allocated for initial capitalisation
together with the proposed commencement date of 2012.
An unprecedented rate of investment is required in
new energy infrastructure in the UK, more than the utility sector
alone can afford to meet. To be successful, the Bank will need
to work with other investors on a commercial basis, pursuing equity
co-investment to attract the levels of funding required to make
a meaningful impact on the £200 billion required over the
next 10 years.
It is important now, as decisions are made about
final design, that the Bank has sufficient scope to invest in
projects which can made a material difference to decarbonisation
ahead of 2030.
Through its Budget, the Government has demonstrated
its commitment to delivering low carbon investment in the UK,
which we and others welcome. Measures such as the carbon floor
price, and reductions to corporation tax rates and Climate Change
Agreement levels will work together to help cement economic recovery
in the UK.
It is important now that this momentum is maintained
as we consider further reforms to the electricity market, set
out in DECC's recent consultation.
March 2011
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