Why a 2030 Power Sector Carbon Target is Essential for Growth

Published on Friday, 12 October 2012 11:32
Written by Peter Young

Meeting our future electricity demand will require one of the biggest investment programmes the UK has ever seen. Add to that the requirements to meet our statutory carbon budgets, which mean effectively zero carbon emissions from our power stations by 2050, and the result is a complete transformation of our power infrastructure

Over the next 10 years, we must leverage £110bn of capital, and most of this from private investors who will only put their money down when they are confident of a fair return. If they do, then the resulting innovation, design and construction is exactly what our economy needs to kick-start growth and regain competitiveness.

Until recently, the Committee on Climate Change (CCC) was successfully guiding us along the right path to decarbonise of our economy. Huge challenges in implementation lay ahead, but there was consensus on the way to go. The UK regularly led the Ernst and Young attractiveness tables for investment in renewables.

But the clarity about our direction of travel is now being undermined, and the UK is no longer seen as a safe place to build low carbon energy. Why? These are some of the major developments that are muddying the waters:

  • The announcement of an unexpected review of the 4th Carbon Budget (2023-27) in 2014, which creates uncertainty around future demand for low carbon energy;
  • Sudden and sharp cuts to solar Feed-in Tariff rates and a 10% cut in support for onshore wind under the Renewables Obligation;
  • Ministerial statements reassuring the gas industry that there will be a significant role for unabated gas in the power sector beyond 2030;
  • Promises of "generous tax breaks" for the gas industry by the Chancellor; and
  • Setting a hard cap on fiscal support to renewables up to 2020 (known as the Levy Control Framework) – which will be announced in the 2012 Autumn Statement, following a long negotiation process held behind closed doors.

In response to the comments about unabated gas in particular, the CCC has written an open letter showing that this sets us on a collision course with our statutory carbon budgets. Continuing boldly down this path creates the fear that our carbon constraints will be expanded (e.g. increasing the 4th carbon budget during the 2014 review) or – worse – cast aside by future governments. Once this confidence is eroded, our attractiveness as a renewable energy investment destination will be in ruins.

Business and industry has widely bought in to the competitive and economic advantage of a low carbon electricity supply in the UK. The security of supply from home generated power, and the predictability of long term energy prices, will make the UK an attractive place to do business. Many were gearing up to invest their own money in contributing to the new generation requirements, helping deliver even more resilience to individual firms. This investment generates jobs and economic activity we sorely need at the moment. It also boosts the green sector of the economy, which the CBI recently highlighted could deliver another £20bn into the economy.

So that is why a powerful alliance of the UK's largest businesses and industry bodies have stated that a 2030 carbon intensity target for the power sector is essential for stimulating new growth in the economy. Only greater clarity from Government can unleash this £110bn investment required to transform the UK's electricity infrastructure and drive wider economic benefits. Recent statements calling for unabated gas in the power sector post 2030 are damaging business confidence in the low carbon economy and undermining major investments capable of delivering growth. A power sector carbon target – set down in legislation – would provide investors with long-term clarity and certainty, and ensure the UK stays within its carbon budgets.

The letter strongly supported the arguments for a 2030 power intensity target set out by the CCC, which, after all, is the government's own independent authority on such matters.

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