Updated: Carbon price may hamper low-CO2 energy
The introduction of a carbon floor price in 2013 will damage the UK's efforts to decarbonise its electricity supply, according to right-leaning think tank the Centre for Policy Studies (CPS).
In a report published today (03 January 2011), the CPS argues that setting a price for carbon over and above that of the EU emissions trading scheme (ETS), will result in more carbon permits in the rest of Europe potentially lowering the cost of the scheme for the rest of the bloc by 20%.
The difference in carbon costs will put off investment in new clean coal and nuclear plants in the UK and increase the costs of energy for households and industry, harming the country’s competitiveness and resulting with millions more households in fuel poverty by 2030, states the report.
It concludes the government must support the creation of new nuclear plants to ensure a low-carbon, secure energy supply in future arguing that weather-dependent renewable technologies, in particular wind and solar, are not providing value for money for taxpayers.
Modern nuclear plants, it says, could offer the UK twice the generating capacity provided by offshore wind energy, and prevent a “dash for gas”, in a bid to decrease carbon output, that would see the country dependent on imported fuel for much of its electricity supply.
The report recommends the government abandon its commitments to increase renewable energy generation and cut greenhouse gas emissions and postpone the introduction of the carbon floor price until 2016, when the first new nuclear plant will be closer to being commissioned.
In publishing the report, CPS director Tim Knox, said that if the government is to see a manufacturing-led economic recovery it needs to do more to ensure internationally competitive energy prices.
“Low cost, reliable and abundant energy is essential to the future competitiveness of British industry,” he argued. “It is incoherent to impose green taxes on manufacturers and then – as happened in the autumn statement – give money back in the form of subsidies.
“Unilateral energy taxes, delays to new generating plant and a lack of generation diversity will drive up costs.”
According to the report nuclear power can play an important role in the UK’s future energy mix to “smooth out” increases in energy costs. Its author, Tony Lodge, called on the government to reassure investors.
“Without political clarity, Britain’s long overdue decision to embrace, support and deliver a series of large new nuclear plants on schedule will be unachievable," he said. "Instead, Britain risks becoming yet more dependent on foreign gas and unmanageable renewable energy to generate electricity.”
The report’s conclusions on the increased costs of green energy policy, seemingly contradict those from DECC which argued, when publishing the UK’s Carbon Plan in December, that meeting the UK’s 80% carbon reduction target was likely to cost the same as taking no action to reduce emissions.
A spokesperson for the department responded to the CPS report by defending the government’s approach to electricity market reform.
“The carbon price floor helps to incentivise the kind of low-carbon energy generation that will insulate us from any future fossil fuel price shocks,” he said. “Energy security is best served by having a diverse energy mix and renewables can provide a secure, home-grown and sustainable source of power. Renewable energy is also helping to encourage investment and drive economic growth.
“We need to reduce our vulnerability to volatile oil and gas markets, which are driving prices up. Our reforms to the electricity market will help bring in the necessary investment to develop cleaner energy sources.”
The CPS’ conclusion are also questioned by Alan Whitehead MP, a member of the UK parliamentary select committee on energy and climate change.
“The argument that a more coherent nuclear policy will result in more nuclear power stations is quixotic, because reactors take a decade to build” he argued. “The only way we could conceivably increase, or speed up, nuclear development is to rip up all the planning rules and give the sector a huge subsidy.”
“In the absence of doing either of those two things, it’s highly unlikely the first new nuclear reactor will be on line by 2020 and by the mid-2020s is unlikely there will be no more than six reactors online, which will provide only a tiny contribution bearing in mind the shutdown that is going on.
“A perfectly good conclusion from the evidence in the paper is that we should work hard to get the next phase of the EU ETS working effectively and, rather than abandoning renewables targets as suggest by the author, we ramp up the installation of renewables as planned.”
Robert Norris, from renewable energy trade association RenewableUK, agreed: “The CPS report seems to suggest that nuclear power is the answer, failing to realise that no nuclear power station can be built to meet our needs in time.
“We’re going to lose 25% of our capacity to generate electricity over the next 10 years and wind energy and other renewables can help to replace that. We have six gigawatts (GW) of wind energy installed so far and the government wants us to have 31GW installed by 2020.
“The UK is the windiest country in Europe – we need to make the most of that natural, free resource to generate clean energy, rather than putting all our eggs into the nuclear basket”.