Draft Energy Bill: Pre-legislative Scrutiny - Energy and Climate Change Contents

7  Emissions Performance Standard

199.  We have expressed our dissatisfaction with the Government's proposals for an Emissions Performance Standard (EPS) on numerous previous occasions.[252] We still believe that introducing the measure as currently designed would be pointless and would merely add complexity to an already overly-complicated package of reforms.

200.  In this section, we highlight new factors that have emerged during the course of our pre-legislative scrutiny. We do not rehearse the arguments made in our previous reports. We refer interested readers to our previous inquiries on Emissions Performance Standards, Electricity Market Reform and Energy Security.[253]


201.  The principle of grandfathering means that once a fossil fuelled power plant receives building consent under a particular emissions limit, the plant will not be affected by any subsequent changes to that level for a pre-determined period. After an "informal consultation", DECC announced in March this year that the initial EPS of 450g/kWh would be grandfathered until 2045. [254] This initial EPS will itself be reviewed in 2015.

202.  Energy companies told us that these grandfathering arrangements were necessary to bring forward investment in new gas-fired generation.[255] However, environmental organisations believed that the 30 year grandfathering period risked locking the UK into a high-carbon electricity system.[256] This echoed the comments made by the Chair of the Committee on Climate Change in a letter to the Secretary of State earlier this year that while the EPS proposal "could be compatible with power sector decarbonisation requirements to meet carbon budgets, [it] also carries the risk that there will be too much gas-fired generation instead of low carbon investment".[257]

203.  Simon Skillings (E3G) warned that if the EPS was grandfathered until 2045, the only lever available to future governments to regulate emissions from unabated gas-fired plant would be the carbon price. He said:

If you throw away that lever [an EPS that affects gas], you could end up in the situation where we have a hugely inefficient vehicle to drive this investment, which is a very, very, very high carbon price—and it will need to be very, very high. Germany […] has exactly this problem. It has lots of coal on the system, and it doesn't matter how much renewables it subsidises on the system; if the carbon price stays at low levels, the coal is going to be pumping it out. It can't get rid of the carbon. This is where an emissions performance standard provides another tool, and we are going to face that situation with gas plant as we go through the 2020s.[258]

204.  The Government's intention to review the EPS in 2015 is another source of uncertainty for investors. It may even cause a "dash for gas" itself, if investors rush to build gas plant before the review. We are concerned that DECC's decision to grandfather the EPS until 2045 is not compatible with our long-term decarbonisation objectives. If too much new unabated gas-fired plant comes forward under these arrangements, future governments could be faced with a tough decision either to miss the carbon budgets or to set an extremely high carbon price, which would ultimately increase costs to consumers. We recommend that a shorter grandfathering period commensurate with decarbonising the electricity system by 2030 should be adopted.

Exemption for carbon capture and storage

205.  The Government intends to exempt projects that form part of the UK Carbon Capture and Storage (CCS) Programme on a case-by-case basis. The draft Bill defines stations that are eligible for exemption as "a generating station at which carbon capture and storage technology is or is to be, or has been, used in commercial electricity generation for the purposes of or in connection with a CCS demonstration project".[259]

206.  Witnesses from environmental NGOs warned that new partial CCS plants could still produce significant greenhouse gas emissions.[260] The RSPB and WWF provided an example: "the proposed 1852MW coal plant in Hunterston, Scotland, would emit 587-650gCO2/kWh, and emissions from year one would be equivalent to adding 63% to Scotland's annual power sector emissions".[261] The NGOs concluded that the CCS exemption could undermine decarbonisation ambitions.[262] The CBI believed that the CCS exemptions were necessary to avoid undermining the development of CCS technology.[263]

207.  CCS is a special case and it is important not to risk delaying or undermining the development of the technology. But DECC should ensure that the Bill provides sufficient safeguards so as to avoid the unintended consequence of undermining decarbonisation. There may be merit in the inclusion of a minimum proportion of emissions to be captured by CCS plants in clause. 37

Parliamentary Procedure

208.  The Secretary of State will have the power to exempt plant from the EPS in the case that he or she thought there were security of supply concerns.[264] According to DECC's Delegated Powers Memorandum on the draft Energy Bill, this decision would be an "executive act" and therefore would not be subject to Parliamentary scrutiny, although the draft Bill does provide for on Order under this section to be laid before Parliament after it has been made.

209.  We believe that any decision to exempt plant from the EPS on energy security grounds should be subject to Parliamentary scrutiny, even if this scrutiny has to be retrospective.

252   Energy and Climate Change Committee, Eighth Report of Session 2010-12, The UK's Energy Supply: Security or Independence?, HC 1065  Back

253   Energy and Climate Change Committee, First Report of Session 2010-12, Emissions Performance Standards, HC 523; Energy and Climate Change Committee, Electricity Market reform; Energy and Climate Change Committee, The UK's Energy Supply: Security or Independence? Back

254   "Davey sets out measures to provide certainty to gas investors", DECC press release 2012/025, 17 March 2012 Back

255   Ev 151, Ev w74, Ev 172, Ev 178, Ev 206, Ev w154, Ev 227, Q 92 [Mr Sambhi and Mr McElroy] Back

256   Ev w26, Ev w34, Ev w37, Ev 137, Ev 187, Ev w163, Q 259 [Mr Molho]  Back

257   Committee on Climate Change, 27 March 2012, Public letter from Lord Adair Turner to the Secretary of State Back

258   Q 126 Back

259   Draft Energy Bill, CM 8362, May 2012, Part 1, Clause 37, p 91 Back

260   Ev w26, Ev 137, Ev w37, Ev 187, Ev w126, Back

261   Ev w26, Ev 187 Back

262   Ev w26, Ev 137, Ev w37, Ev 187 Back

263   Ev 206 Back

264   Electricity Market Reform: policy overview, Annex D: Electricity Market Reform: Update on the Emissions Performance Standard, May 2012 Back

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© Parliamentary copyright 2012
Prepared 23 July 2012