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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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

19. 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:

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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’

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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?

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Thanks
http://www.ukerc.ac.uk
https://twitter.com/watsonjim2

23. Source: DECC
Energy Bill 2012/13:
contracts for difference