On 19 June 2012, the energy and climate change select committee held public evidence sessions on the draft Energy Bill, to which IPPR made a submission covering carbon targets and emissions performance, feed-in tariffs and the 'contracts for difference' mechanism, the carbon price floor and energy efficiency measures.
In summary, IPPR submitted that:
- The Energy Bill reduces the government's ambition on carbon emissions reduction by the power sector. To address this, we believe the government should set out explicitly on the face of the bill that unabated gas will only be permitted to run at low load factors beyond 2030.
- The proposed contract for difference (CFD) arrangements are complex, could undermine investment levels in new generation and could worsen competition in the energy supply market.
- A new impact assessment is urgently needed to gauge whether the newly proposed contracting arrangements remain the most cost-effective revenue support mechanism. The government should fundamentally rethink the administration of the CFD mechanism and challenge the European Commission if their rules prevent a less bureaucratic set of proposals for British industry. If the government does continue with the CFD mechanism as proposed, absolute transparency must be provided on the agreed strike price and the interim 'letters for comfort'.
- The bill misses an opportunity to improve Britain's unilateral carbon price floor (CPF). It should also do more to improve energy efficiency for homes and businesses.
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