Friends of the Earth additional memorandum|
The current EMR proposals are more likely to entrench
existing UK energy market weaknesses rather than remove them.
They will take parliament (and the public) for an expensive and
inelegant ride. Friends of the Earth believes the proposals
the UK with a more closed electricity market than it has
a complex and inefficient system of market subsidies, (directed
mainly towards big energy companies), and requiring long-term,
rather than transitional, taxpayer/bill-payer support.
to deliver the UK's 2020 renewable energy commitments (or the
Climate Change Committee's 2030 decarbonisation targets).
the UK with the wrong type of gas infrastructure, post
radical decentralisation, advocated elsewhere
in government policies.
expensive and regressive subsidies to nuclear energy, and
to deliver enhanced UK energy security or employment growth.
Friends of the Earth believes
that parliament is in danger of missing the opportunity to deliver
a dynamic energy market transformation, capable of sustainably
meeting the UK's energy needs in the decades ahead. Our contention
is that different principles should underpin energy market reform:
There are considerable barriers to entry
to the current UK energy market. Reform measures must enhance
competition and diversity of supply, in a market
that is currently closed.
Subsidies should be transitional rather
than permanent. Essentially, this means devising subsidies
targeted towards new technologies rather than old industries.
priority to renewable rather than non-renewable energy systems.
energy systems to meet their own environmental impact and insurance
reducing levels of financial support (degression rates)
over a defined time period: pushing technologies towards market
viability rather than permanent public subsidy.
decentralised energy systems, as a more effective approach
to delivering energy security and capacity management.
2) Demand reduction
This is barely recognised in the current EMR proposals,
but is central to the UK's ability to reach its 2050 carbon reduction
targets. An Energy Savings Trust study calculated that almost
two thirds of the UK's 2050 carbon targets will have to come from
energy saving. Grid decarbonisation would have to make up
the remainder. Nowhere is this balance reflected in the EMR proposals.
3) Missing Measures
EMR proposals leave the UK woefully adrift from the
more exciting international initiatives addressing sustainable
focussing on electricity, rather than energy as a whole, EMR
risks inviting the wrong sort of investment in gas (CCGT rather
than combined heat and power systems). Gas has to be included
in the Emissions Performance Standards framework if a low carbon/renewable
gas infrastructure is to emerge in the UK. (NB. The UK recently
opened its first "biomethane from waste" gas power station.
By 2020, we would need 200 such plants to meet 50% of the UK's
domestic energy needs. China currently has 3,000 city-scale biodigestor
plants and will have 6,000 by 2020).
access. The UK is at the back of the international
"renewable energy" league, partly by choosing not to
apply the "priority access to system" clauses
of the EU Renewable Energy Directive. This simply boosted the
profits (and power) of the UK's existing energy cartel. If the
government wants to promote diversity and competition, Grid
access must be radically opened up.
technologies. The current DECC consultation
offers no vision about turning the UK into a world leader in tomorrow's
energy offers huge possibilities in the promotion of decentralised
energy systems. European cities such as Munich and Paris already
have substantial geothermal energy systems. DECC estimates that
this could deliver 10% of UK energy needs. Other sources suggest
that the real scope could substantially exceed total UK energy
stream. The UK has 60% of Europe's potential
tidal stream energy. The central challenge is to get generators
safely anchored to the seabed and then connected into the mainland
energy. Berlin already meets 40% of its
own energy needs, and from renewable sources. Hamburg's "Lichtblik"
project plans to construct an "energy swarm" rather
than two new power stations; installing 100,000 CHP boilers (in
homes, schools, offices, factories, hospitals, etc) and connecting
them to a citywide control centre to balance out citywide energy
needs. Households/schools etc are paid for the role they play
as energy suppliers.
These offer fundamentally different concepts of sustainable
energy systems for the 21st century. They carry the advantages
of avoiding the commissioning/decommissioning costs of power stations,
create substantial employment and deliver a greater sense of energy
security. No such vision can be found within the EMR.
4) Markets and auctions
In its approach to capacity payments and auctions,
the government should adopt whichever system best creates a
genuinely open and competitive energy market. This probably
argues against auctions, which tend to favour the big players
and disfavour new/smaller entrants. A wider examination is needed
of other market balancing mechanisms.
Moreover, the government must rethink its position
on carbon pricing, carbon taxes and carbon budgets. A UK
floor price for carbon is simply a new subsidy for existing nuclear
power. It would be an expensive addition to taxpayer or bill-payer
costs and deliver no new energy output.
The Prime Minister took a different approach to carbon
savings on the government estate; instructing departments to deliver
a 10% reduction in their carbon emissions this year. It
mirrors FoE's work on "local carbon budgets".
As a market change mechanism, we would urge the government to
consider this (and other alternatives) in preference to an artificial
market for carbon.
Finally, the Committee may wish to look at the failure
of the George Bush's "nuclear renaissance" programme
in the USA, before pinning too much hope about it being any better
in the UK. In particular, North Carolina's 2010 comparison of
price trends in nuclear power and photovoltaicswhere prices
are now equaloffers a different perspective on what sustainable
energy markets of the future might look like.
The UK deserves a bolder and more sustainable
vision of EMR than the one currently on offer.