EEF called on the government to show the strong leadership necessary to get energy policy back on track, failure to which will undermine confidence in the future security and competitiveness of the country’s energy supply.
According to EEF, the country needs to invest billions of pounds in infrastructure, manage the risks associated with growing dependence on imported gas and meet a renewable energy target amongst the most ambitious and costly in the world all at the same time.
EEF believes that with decisive action there is still time to put in place a policy framework, which will attract the estimated GBP200bn worth of investment needed and safeguard the interests of consumers.
Steve Radley, director of policy at EEF, said: “Government needs to demonstrate leadership in this critical area and we need to act fast. The time needed to secure finance, mobilize supply chains and deliver infrastructure means the energy industry will start making far-reaching and long-lasting investment decisions within the next couple of years.”
In its ‘Energy Action Plan’, EEF argues that reversing nuclear power’s declining share of electricity generation is vital in reducing emissions at an affordable price. The government must keep to the existing timetable with key activities including completion of planning reforms later this year and completion of the assessment of new reactor designs next year.
Removing the subsidy nuclear currently provides to fossil fuels and treating it consistently with renewable energy will create a level playing field for investors.
EEF also said that the UK requires a major expansion of renewable energy but most renewable technologies are expensive and dependent on subsidy. The government needs to reform the two main support programs inherited from its predecessor, the Renewables Obligation for large-scale technologies and the Feed-in Tariffs for small-scale technologies, both of which represent poor value for money.
EEF believes government must subject the cost-effectiveness of the 2020 renewables target to greater scrutiny, starting with the progress report scheduled to be submitted to the European Commission by the end of 2011. Until it is proven that a fixed renewable energy target is the most cost-effective way to cut carbon emissions, the target should not be raised.
Reforming carbon pricing is essential to encouraging investment in cost-effective low-carbon energy technologies. A stable and consistent carbon price will reduce uncertainty over returns for investors and create a level playing field amongst low-carbon energy technologies. EEF believes the Climate Change Levy should be reformed into a carbon-based levy.
This could be introduced in 2012 or in 2013 to coincide with the start of Phase 3 of the EU Emissions Trading Scheme, the UK’s second carbon budget and new round of climate change agreements, EEF said.
The government must address the growing risk to the security of supply from the UK’s increasing dependence on imported gas. Currently, the UK has only 16 days of storage compared to 99 in Germany and 122 in France. As such government should introduce a supplier obligation or similar measure by 2012, which will provide an early incentive to invest in storage facilities.
According to EEF, carbon capture and storage can provide major business opportunities as well as a vital contribution to both energy security and tackling climate change. However, the UK has fallen behind in the development of this potentially breakthrough technology.
To get back on track, it must complete the existing competition by the end of this year and complete the second demonstration program within two years. In parallel, a dedicated levy on electricity suppliers, or an equivalent, must be introduced in April 2011 to ensure funding for the program exists.
