Memorandum submitted by Alstom|
Note: this is a preliminary response only.
As the EMR package was only published on 16 December, there has
not been enough time to develop a full response with key experts
across the company and we are still considering important details
in the Government's consultation documents. We will provide a
final, definitive response before the Government's deadlines.
1. Alstom supports the UK Government's target
of reducing emissions by 80% by 2050. We also agree with the assessment
that - in order to meet the 2050 target - the UK power sector
needs to be largely decarbonised by 2030.
2. In principle, we favour market solutions,
such as the EU-ETS, but agree that there is a need for complementary
regulation and incentives to support faster development of the
low carbon economy. We agree with the Government that the existing
market will not deliver the scale of long-term investment, at
the pace we need, in particular in renewables, new nuclear and
CCS, nor will it give consumers the best deal.
3. Our initial,
high-level comments on the Government's proposed EMR package are
that we agree that the current electricity market framework needs
reform. There is much in the Government's proposed package that
appears sensible and likely to help to deliver the objectives
that Ministers have set.
4. We support the Government's intention to establish
greater carbon price certainty, providing it does not interfere
with the successful operation of the EU-ETS. In terms of level,
we are still assessing the Government's three scenarios. We agree
with the Government's view that the key factor in the "effectiveness
of the policy is the reaction of potential investors, and whether
the mechanism is bankable". That bankability appears to be
uncertain and must therefore create an element of risk in the
5. We agree that low carbon generation requires
additional support in order to meet the UK's decarbonisation targets.
All low carbon technologies should be eligible, in order to encourage
a diverse portfolio. The FIT with a Contract for Difference appears
to be an effective proposal, but we need to consider further all
of the possible implications for the market.
6. On capacity payments, we are still reviewing
the Government's proposals and considering the evidence in the
7. On an Emissions Performance Standard, we have
serious reservations about the Government's proposal:
right EPS could help to drive CCS, but only if it is set at a
level that does not discriminate between coal and gas.
EPS at a technology-neutral level from, say, 2020, could provide
support to the deployment of CCS, increasing the diversity and
security of supply by enabling continued, but decarbonised, use
therefore have serious concerns about the Government's two proposed
limit values for an EPS - both of which would only affect coal.
would inevitably result in a significant increase in the demand
and price for gas as generators switch away from coal. That in
turn would have an adverse impact on security of supply and would
produce additional gas power stations without CCS - locking in
avoidable CO2 emissions.
no new coal build, there would be a much smaller potential market
for CCS. A likely consequence is that industry would reduce its
investment in CCS.
CCS market would take longer to build. As economies of scale will
be crucial to bringing the costs down, CCS would not be commercially
viable until much later.
Interaction between the measures and with existing
8. Although we are still reviewing the consultation
documents, it appears to be far from certain what the interactions
will be between the four parts of the Government's package and
what effect they will have on existing policies. Until the interactions
are better understood, it is difficult to make an assessment of
whether the Government's reform package will create enough certainty
9. As the supplier of around 25% of the world's
installed power generation capacity (and around 50% in the UK),
Alstom has wide experience of power plant design and construction
in over 70 countries.
10. Alstom offers technologies for all energy
sources: gas, coal, oil, geothermal, biomass, hydro, nuclear,
wind and solar. We have developed 12 CCS demonstration projects
around the world.
11. Alstom employs over 6,500 people in the UK
at around 30 locations. We are responsible for the maintenance,
refurbishment and operation of many of the country's existing
power plants, providing a full mix of power generation technologies,
combining traditional and renewable energy sources with clean
power solutions. Alstom is responsible for the construction of
four of the six new gas-fired power plants in the UK providing
close to 6GW of new electrical power. We are also delivering three
onshore wind farms.
12. We would be happy to provide further details
on our developing thinking as the Committee's inquiry progresses.