Energy White Paper tackles climate change and security of supply

The UK Government yesterday, 23rd May, published its anticipated Energy White Paper which follows on from its Energy Review Report of July 2006, and which sets out proposals for dealing with the long term energy challenges arising from both climate change and the need to ensure secure, clean and affordable energy in the UK.

Proposals in the White Paper relate principally to the following three objectives:

• encouraging electricity generation from low-carbon supplies.
• ensuring the UK’s security of energy supply.
• reducing energy consumption and emission of greenhouse gases.

The proposals will impact widely on energy industry participants and players, particularly those that are (or are intending to become) involved in the nuclear and renewable sectors.

Developing Low-carbon electricity generation

The key proposals in the White Paper seek to encourage an increase in low-carbon electricity generation by among other things:

• considering whether the private sector should have the option of investing in new nuclear power stations, which could play a key part in meeting emission reduction and security of supply objectives. A consultation on the future of nuclear power stations has been published alongside the White Paper and closes on 10 October 2007.
• banding of the Renewables Obligation (RO) by 2009 to allow greater support to be given to emerging renewable technologies (such as off-shore wind) than to established technologies. In the background is the Government’s aspiration for 20% of the UK’s electricity supplies to come from renewable sources by 2020. A consultation on the specific bands proposed is issued alongside the White Paper and closes on 6 September 2007.
• a consultation later in the year on ‘capture readiness” issues in future applications under Section 36 of the Electricity Act, and a competition, to be launched in November 2007, for a commercial scale demonstration of carbon capture and storage technologies.
• more flexible market and regulatory arrangements for distributed generation, to be consulted on and implemented by 2008.
• increasing the use of biomass in heat generation and introducing a Renewable Transport Fuel Obligation in 2008-2009 to help increase the share of renewables in transport fuels.

Security of supply

The White Paper proposes that the UK:

• establish a new development consent regime for nationally significant infrastructure to overcome some of the perceived issues with the current planning regime.
• increase gas import capacity by 15-30% by 2020 and an increase in electricity generation capacity of around 30-35 GW over the next two decades.
• establish new infrastructure to the West of Shetland to maximise recovery of the UK’s remaining North Sea oil and gas.
• create a unified, single consent regime for offshore gas development and a new offshore licensing system to facilitate offshore gas storage and unloading of Liquefied Natural Gas.

Saving energy and reducing emissions

The White Paper also sets out a number of proposals to increase energy efficiency and reduce greenhouse gas emissions, such as introducing a requirement on all businesses and households to have Energy Performance Certificates and requiring large businesses to be subject to a mandatory cap and trade scheme known as the “Carbon Reduction Commitment”. The Government’s position is also that the EU Emissions Trading Scheme should form the hub of a global carbon market.