As expected, the long-awaited UK Energy Policy Review, which outlines a series of proposals designed to combat climate change and improve security of energy supply, supports the development of new nuclear stations in the UK, saying: “We have concluded that new nuclear power stations would make a significant contribution to meeting our energy policy goals.” However, in addition to the headline grabbing nuclear strategy, the review also includes much to encourage other forms of generation, notably clean coal and renewables.
The government supports a significant contribution from coal in the UK generating mix, particularly through clean coal generation and carbon capture and storage (CCS). It intends to address CCS, removing regulatory barriers, with a statement at the Pre-Budget Report due in autumn 2006. Along with new guidelines, the review also suggests a policy aimed at recognising CCS as a valid source of emissions reduction under the Clean Development Mechanism. In addition, the Carbon Abatement Technology demonstration programme will formally launch its first call for proposals in September 2006, with a first call worth £10 million ($18 million) which will focus on the pre-commercial demonstration of key components and systems to support carbon abatement technologies.
On renewables, the review proposes extending the existing renewables obligation (RO) to 20% of capacity from the current 6.7% “when growth in renewables allows.” Under current policy, it would rise annually to 15.4% in 2015/16, then remain at that level until the obligation ceases in 2027.
In addition, the government is to launch a consultation on technology banding within the RO to give extra incentives to emerging technologies such as offshore wind, wave and tidal generation. Other measures outlined in the review include amending the RO to remove the risk of unanticipated Renewable Obligation Certificate (Roc) oversupply and freezing the Roc buyout price from 2015. Any changes would be introduced in 2010.
The review acknowledges that the current planning system creates delays and uncertainties for all large energy infrastructure projects, pointing out that, on average, in England and Wales since 1990, large electricity projects have taken 36 months to secure planning consent. Addressing the frequently protracted planning regime, the government will publish a “statement of need” on renewables, and will ensure renewables are firmly embedded in the forthcoming Planning Policy Statement on Climate Change. Planning guidance will also be issued with regard to overhead transmission lines later in 2006 while new inquiry rules for applications under the Electricity Act are to be introduced in spring 2007. The review also sets out government strategy to accelerate access to the electricity grid for renewable generators. The government will also appoint a high-powered inspector whose role will be to ensure that planning inquiries are run to clearly defined timescales.
The British Wind Energy Association (BWEA) welcomed the extension to the Renewables Obligation to support the generation of 20% of electricity supplies from green sources, although it expressed concern at the absence of a timescale in which this is to be achieved.
Looking further afield, the review also sets out proposals to strengthen the European Emissions Trading Scheme (EU ETS) post 2012 with a series of measures that will provide greater clarity on when and how limits on emissions will be decided in future and harmonising the EU ETS, particularly the way that allowances are distributed, so that there are clear and strong incentives to invest in low carbon technology. This extends to considering whether more sectors – such as CCS – should be included. A communication from the European Commission is expected in autumn 2007 on this and other issues relating to CCS.
Measures to facilitate new nuclear power stations include streamlining the licensing and planning processes and clarifying the strategy on decommissioning and waste. However, the government is clear that it will be for the private sector to make commercial decisions on investment in nuclear generation and, furthermore, will assume the full cost of decommissioning and waste disposal.
Regarding waste disposal costs, the review identifies the need to share the burden between existing legacy wastes and those arising from nuclear new build, although the private sector will “pay a charge covering the full and equitable costs of managing the waste generated over the expected life of each new power station,” and will be responsible for the provision of interim storage over the life of the plant.
While the private sector will be responsible for any investment decisions, the government has pledged to act to address regulatory barriers such as those associated with the planning and licensing process. A major strategy measure to facilitate the planning process will see the Health and Safety Executive, the Nuclear Installations Inspectorate (HSE/NII) and the Environment Agency introduce a pre-licensing, design authorisation procedure that would allow potential developers to apply for prelicensing approval for a generic reactor design before committing significant sums of capital to planning and construction. HSE will develop guidance for this new process to be in place by the start of 2007.
Considering distributed generation, the government is conducting a fundamental appraisal with regulator Ofgem on the incentives and barriers that affect distributed generation including Combined Heat & Power (CHP), intending to publish new planning guidance on CHP later in 2006 with the review to report in the first half of 2007. In the meantime, the government is to introduce changes to allowance allocations that will result in more favourable treatment for CHP in Phase two of the European Emissions Trading Scheme
The government also intends to aggressively pursue its microgeneration strategy, removing barriers to the use of small-scale, low-carbon technologies such as household wind turbines or solar panels and ensure that electricity suppliers offer to buy surplus electricity back at an appropriate price. This includes a consultation on removing the requirement for planning permission for these technologies.
Setting out the framework within which the energy market will operate for the coming 30 to 40 years, Trade and Industry Secretary Alistair Darling said: “We face two big challenges, climate change and the need to provide secure cleaner energy at affordable prices.”
Over the next two decades it is likely that the UK will need around 25GW of new generation capacity; and the energy policy review aims achieve this while moving the government a significant distance forward on its major energy policy goals of cutting carbon dioxide emissions by some 60% by about 2050 while maintaining reliable energy supplies and a competitive energy market.
The full document is available from the Energy Review website at www.dti.gov.uk/energy/review