The Bill follows on from the Low Carbon Transition Plan. This set out an ambitious route-map for a move to a low carbon economy. It outlined the actions which will cut emissions by 34% on 1990 levels by 2020 on the way to achieving a reduction of at least 80% by 2050, and maintain secure energy supplies while maximising economic opportunities and protecting the most vulnerable consumers. The Bill would implement key elements of the Plan that require primary legislation.
The purpose of the Bill is to:
- Provide support for energy consumers, giving a greater amount of help to the poorest and most vulnerable, as well as introducing a new financial incentive for carbon capture and storage demonstration projects.
The main benefits of the Bill would be:
- Tackling fuel poverty and protecting more of the most vulnerable consumers as we begin transitioning into a low carbon UK.
- Ensuring that the conditions are in place for dynamic, competitive markets and that they work fairly and deliver sustainable and secure energy for all.
- Demonstrating carbon capture and storage at commercial-scale – the critical next step in the move towards the global deployment of CCS at the levels required to achieve its potential as a carbon-reduction technology. The CCS demonstration programme delivered by the CCS Incentive will also put the UK at the forefront of global efforts to develop this technology, providing significant first-mover opportunities for UK-based firms.
The main elements of the Bill are:
- Providing mandatory social price support, such as in the form of an electricity bill rebate. This builds on the success of the voluntary agreement with energy companies which ends in 2011 and has helped reduce the fuel bills of more than one million vulnerable customer accounts. The level of support to be provided through the new mandated scheme will be greater than the £150m committed by suppliers in the final year of the agreement.
- Making absolutely clear that Ofgem, the energy market regulator, must:
- include the reduction of carbon emissions and the delivery of secure energy supplies in their assessment of the interests of consumers; and
- step in proactively to protect consumers as well as considering longer term actions to promote competition.
- Giving Ofgem additional powers to tackle market exploitation where companies take advantage of constraints in the electricity transmission grid.
- Strengthening the deterrent nature of Ofgem’s powers by extending the time limit from 12 months to 5 years within which Ofgem can impose financial penalties for breaches of licence conditions.
- The new CCS Incentive would support the construction of up to four commercial-scale CCS demonstration projects in the UK.
- The CCS Incentive could also provide funding for the retrofit of those demonstration projects to their full capacity, should it be required in future.
