The Bigger Picture for Energy in the UK, by UK Energy Research Centre (UKERC) Research Director Jim Watson, June 2013

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UK Energy Research Centre (UKERC) Research Director Professor Jim Watson talks about "The Bigger Picture for Energy in the UK: Current Policies and the Energy Bill" at the Eversheds Conference: …

UK Energy Research Centre (UKERC) Research Director Professor Jim Watson talks about "The Bigger Picture for Energy in the UK: Current Policies and the Energy Bill" at the Eversheds Conference: Connecting Projects to the Grid, June 2013.

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  • 1. Click to add title The Bigger Picture for Energy in the UK: Current Policies and the Energy Bill Jim Watson, Research Director Eversheds conference: Connecting Projects to the Grid 18th June 2013
  • 2. Overview 1.UK climate change targets and the electricity sector 2.Other energy policy goals: security and affordability 3.Meeting the goals: Energy Bill 2012/13
  • 3. The UK’s low carbon transition Keep the lights on at the same time Source: Committee on Climate
  • 4. The UK’s low carbon transition: CCC projection for 2020 Source: Committee on Climate Change (May 2013) 12GW of fossil and 3.5GW of nuclear plant retires EU renewables target: 30-35% of electricity by 2020 Energy efficiency; two CCS demos; 5GW unabated gas
  • 5. The UK’s low carbon transition CCC scenarios for 50g/kWh in 2030 Source: Committee on Climate Change (May 2013)
  • 6. The UK’s low carbon transition CCC scenarios for 50g/kWh in 2030 Source: Committee on Climate Change (May 2013)
  • 7. Reducing emissions: progress to date 0 100 200 300 400 500 600 700 800 900 1990 1995 2000 2005 2010 Emissions:mtCO2(equiv) CO2 emissions Other GHGs Total GHGs Source: Department of Energy and Climate Change CO2 emissions are down 19% since 1990 But emissions rose 20% (1990-2009) on a consumption basis
  • 8. Important for many reasons: • High energy prices since mid 2000s • Geopolitics and conflicts (e.g. Iraq war; Russia-Ukraine gas disputes) • Impacts of extreme weather events (e.g. power blackouts; hurricane Katrina) • Ageing and/or inadequate infrastructure (power plants; gas storage capacity) Debates often focus on international risks, but many risks closer to home Domestic energy sources are not always more secure than imports Maintaining energy security
  • 9. -200.0 -100.0 0.0 100.0 200.0 300.0 400.0 500.0 600.0 1980 1985 1990 1995 2000 2005 2010 TWh Exports Pipeline Imports LNG Imports Net Imports Source: DECC Maintaining energy security From gas exporter to importer / trader Maintaining energy security: from gas exporter to importer
  • 10. Source: DECC Energy Security Strategy (2012) Maintaining energy security From gas exporter to importer / trader Maintaining energy security: will the lights stay on? Scenarios from DECC and Ofgem
  • 11. Source: National Grid 10 Year Statement (2012) Maintaining energy security From gas exporter to importer / trader Maintaining energy security: will the lights stay on? Three scenarios from National Grid Gone green and accelerated growth meet govt targets
  • 12. Maintaining energy security Increasing / more complex power flows Source: National Grid 10 Year Statement
  • 13. 0 100 200 300 400 2000 2002 2004 2006 2008 2010 2012 Index(2000=100) Gas Electricity Gas prices have trebled since 2000 Electricity prices have doubled since 2000 Affordability: Domestic gas & electricity prices Affordability: domestic electricity and gas prices
  • 14. Affordability: what is causing higher bills?
  • 15. Affordability Impacts of policies to 2020 (DECC) Affordability: what is causing higher bills?
  • 16. Trade-offs between policy goals
  • 17. Energy Bill 2012/13: main elements 1. Emissions performance standard (EPS) To stop new, unabated coal plants being built 2. Capacity mechanism To make it easier to justify investment in capacity that is not often used (to balance intermittent renewables) 3. Long term contracts for difference To give greater certainty to potential investors in capital intensive, low carbon plant (nuclear, offshore wind and CCS) 4. Carbon price floor already implemented: £15.70 / tonne from April 2013
  • 18. Energy Bill 2012/13: levy control framework 0 1000 2000 3000 4000 5000 2011-12 2012-13 2013-14 2014-15 AllowedSpending(£m) Renewables Obligation Feed in Tariffs Warm Home Discount Source: House of Commons Library Source of finance for CfDs: cap on funding via consumer bills will rise to £9.8bn by 2020:
  • 19. Click to add title Energy Bill 2012/13: some areas of debate Main controversy is about 2030 electricity decarbonisation target. Narrowly voted down in the House of Commons: will be debated again today Role of unabated coal. Current version of the Bill does not guarantee existing stations will close Energy demand reduction (& response) incentives have been included in the capacity mechanism, though very late in the process Provisions for smaller generators debated, but not yet included. Proposed ‘green power auction market’
  • 20. Click to add title Energy Bill 2012/13: some unanswered questions Will the government take up enabling powers to implement decarbonisation target in 2016 (alongside 5th carbon budget)? Contract prices are being administratively set (see, for example, debate on Hinkley C). How and when will there be a transition to more competitive approach? Until then, how will consumers be protected from paying too much for new low carbon power plants? Will the Bill be ‘fit for purpose’ for smaller players and independents? Clear links to market competition issues How much demand reduction & demand response will the capacity mechanism deliver?
  • 21. Click to add title Thanks http://www.ukerc.ac.uk https://twitter.com/watsonjim2
  • 22. Source: DECC Energy Bill 2012/13: contracts for difference