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Energy policy of the United Kingdom
The current energy policy of the United Kingdom is the responsibility of the Department for Business, Energy and Industrial Strategy (BEIS), after the Department of Energy and Climate Change was merged with the Department for Business, Innovation and Skills in 2016. Energy markets are also regulated by the Office of Gas and Electricity Markets (Ofgem).
Areas of focus for energy policy by the UK government have changed since the Electricity Act 1989 and the Gas Act 1986 privatised these utilities. The policy focuses of successive UK governments since the full liberalisation of gas and electricity markets in 1998 and 1999, have included managing energy prices, decarbonisation, the rollout of smart meters, and improving the energy efficiency of the UK building stock.
The 2007 White Paper: "Meeting the Energy Challenge" set out the Government's international and domestic energy strategy to address the long term energy challenges faced by the UK, and to deliver four policy goals:
- To put the UK on a path to cut carbon dioxide emissions by some 60% by about 2050, with real progress by 2020;
- To maintain reliable energy supplies;
- To promote competitive markets in the UK and beyond, helping to raise the rate of sustainable economic growth and to improve productivity; and
- To ensure that every home is adequately and affordably heated.
The scope of energy policy includes the production and distribution of electricity, transport fuel usage, and means of heating (significantly Natural Gas). The policy recognises: "Energy is essential in almost every aspect of our lives and for the success of our economy. We face two long-term energy challenges:
- Tackling climate change by reducing carbon dioxide emissions both within the UK and abroad; and
- Ensuring secure, clean and affordable energy as we become increasingly dependent on imported fuel."
The policy also recognises that the UK will need around 30-35GW of new electricity generation capacity over the next two decades as many current coal and nuclear power stations, built in the 1960s and 1970s, reach the end of their lives and are set to close.
The 2006 Energy Review reintroduced the prospect of new nuclear power stations in the UK. Following a judicial review requested by Greenpeace, on 15 February 2007 elements of the 2006 Energy Review were ruled 'seriously flawed', and 'not merely inadequate but also misleading'. As a result, plans to build a new generation of nuclear power stations were ruled illegal at that time. (See Nuclear power in the United Kingdom for details). In response, the Government ran "The Future of Nuclear Power" consultation from May to October 2007. The Government's response to the consultation conclusions, published in January 2008, state "set against the challenges of climate change and security of supply, the evidence in support of new nuclear power stations is compelling."
The January 2008 Energy Bill updates the legislative framework in the UK to reflect their current policy towards the energy market and the challenges faced on climate change and security of supply. Key elements of the bill address nuclear, carbon capture and storage, renewables, and offshore gas and oil. A framework to encourage investment in nuclear power within a new regulatory environment was simultaneously published in the January 2008 Nuclear White Paper.
In October 2008, the Government created the Department of Energy and Climate Change to bring together energy policy (previously with the Department for Business, Enterprise and Regulatory Reform), and climate change mitigation policy (previously with the Department for Environment, Food and Rural Affairs).
Though energy policy is an area reserved to the UK government under the Scotland Act 1998 that established devolved government for Scotland, the Scottish Government has an energy policy for Scotland at variance with UK policy, and has planning powers to enable it to put some aspects of its policy priorities into effect.
A Research and Markets review estimated the 2006 total market value of UK inland energy consumption was GBP 130.73bn. Consumption by the energy sector was valued at GBP 28.73bn, while the value of consumption by the non-energy sector was GBP 128.2bn, with transport being the largest component of the non-energy sector. The UK is currently proposing wide-ranging reforms of its electricity market, including measures such as contracts for difference for generators and a capacity market to ensure security of supply in the latter half of this decade.
Primary energy sources of electricity supply
Historically a country emphasising its nuclear and off-shore natural gas production, the United Kingdom is currently in transition to become a net energy importer.
Coal usage may be expected to decline steadily because of eroding cost advantages and pressure to reduce sulfur and carbon (carbon dioxide) emissions, notwithstanding ongoing subsidy policies designed to retain jobs in the coal mining industry. Future coal usage is highly dependent on legislative drivers on emissions and the need to have security of supply. Whilst the costs of burning coal with desulfurisation and carbon capture facilities is greatly increased, it is still being actively considered as part of the UK energy strategy due to large domestic reserves, higher price stability than natural gas and reduced capital expenditure and construction time for plant compared to nuclear power.
The 2002 Energy Review concluded that the option of new investment in clean coal technology (through carbon sequestration) needed to be kept open, and that practical measures should be taken to do this.
Ironbridge ceased operations in late 2015. Then in 2016, three power stations closed at Rugeley, Ferrybridge and Longannet. Eggborough closed in 2018 and has been granted consent to convert into a gas fired power station. Lynemouth power station was converted to run on biomass in 2018 and Uskmouth is being converted. It has been announced that Cottam will close in 2019 and Kilroot will also close imminently.
In May 2016, for the first time solar power produced more electricity than coal, producing 1.33TWh over the month compared to 0.9TWh from coal. On 21 April 2017, for the first time since the 19th century, the UK had a 24-hour period without any generation from coal power. As of 2018, the use of coal power is decreasing to historic lows not seen since before the Industrial Revolution. Coal supplied 5.4% of UK electricity in 2018, down from 7% in 2017, 9% in 2016, 23% in 2015 and 30% in 2014.
During the 1980s and early 1990s, there was a massive expansion in gas-fired generation capacity, known as the Dash for Gas. The rapidity of construction of gas-fired plants (compared to coal-fired or nuclear plants) was especially attractive due to the high interest rates of the period.
Natural gas looks set to take a smaller part in providing future UK energy needs. Domestic production from the North Sea gas fields continues to lessen. And despite investment to enhance pipelines and storage of imported natural gas (mostly from Norway) there is a reluctance to allow too great a reliance on Russia and its gas exports for energy needs.
By 2021, North Sea oil and natural gas production is predicted to slip 75 percent from 2005 levels to less than one million barrels per year. Oil and coal reserves for all of Europe are among the most tenuous in the developed world: for example, Europe's reserves to annual consumption ratio stands at 3.0, perilously low by world standards.
A new "dash for gas" was announced by energy secretary Amber Rudd in November 2015. This is required to fill the gap between the closure of all coal-fired power stations by 2025 and the delayed opening of new nuclear power stations.
Following the UK Government's January 2008 decision to support the building of new nuclear power stations, EDF announced that it plans to open four new plants in the UK by 2017. EON and Centrica have also shown interest in building further plants. It is unlikely that more nuclear power stations will be built in Scotland as the Scottish Government is opposed.
From the mid-1990s renewable energy began to contribute to the electricity generated in the United Kingdom, adding to a small hydroelectricity generating capacity. Renewable energy sources provided for 6.7 per cent of the electricity generated in the United Kingdom in 2009, rising to 11.3% in 2012.
By mid-2011, the installed capacity of wind power in the United Kingdom was over 5.7 gigawatts and the UK was ranked as the world's eighth largest producer of wind power. Wind power is expected to continue growing in the UK for the foreseeable future, RenewableUK estimates that more than 2 GW of capacity will be deployed per year for the next five years. Within the UK, wind power is the second largest source of renewable energy after biomass.
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Energy end usage
- See main article Energy use and conservation in the United Kingdom
For 2005, the break down of UK energy usage by sector was approximately:
There is a steady increase of fuel usage driven by an increasingly affluent and mobile population, so that fuel use increased by ten percent in the decade ending 2000. This trend is expected to be mitigated by increased percentage of more efficient diesel and hybrid vehicles.
United Kingdom space and hot water heating consume a greater share of end use compared to the US and more mild southern European or tropical climates. With regard to building and planning issues affecting energy use, the UK has developed guidance documents to promote energy conservation through local councils, especially as set forth in Part L of the Building Regulations (Conservation of Fuel and power). The associated document. Part 2B, addresses commercial uses, and is generally complete as to heating issues; the guidance is lacking on lighting issues, except with guidelines for local switching of lighting controls. In particular there are no standards set forth for illumination levels, and over-illumination is one of the most significant unneeded costs of commercial energy use.
From June 2007 buildings in the England and Wales have to undergo Energy Performance Certification before they are sold or let, to meet the requirements of the European Energy Performance of Buildings Directive (Directive 2002/91/EC).
Energy market policy history
1980s market liberalisation
Under the Conservatives during the 1980s and 1990s, Government policy was one of market liberalisation linked to the privatisation of state controlled energy companies and the dismantling of the Department of Energy.
As a consequence, Government no longer has the ability to directly control the energy markets. Regulation is now carried out through the Office of Gas and Electricity Markets (OFGEM) in Great Britain, and the Northern Ireland Authority for Utility Regulation (NIAUR), while energy policy is largely limited to influencing the operation of the market. Such influence is exerted through taxation (such as North Sea Oil Tax), subsidy (such as the Renewables Obligation), incentives, planning controls, the underwriting of liabilities (such as those carried by the Nuclear Decommissioning Authority), grants, and funding for research.
1990s to 2000s
The UK Government continued to make reforms throughout the 1990s in the interests of creating a competitive energy market. VAT was first applied to domestic energy in 1994.
When the Labour Government came to power in 1997, the commitment to creating a competitive energy market was maintained, with new Energy Minister John Battle MP also emphasising the Government's social obligation to protect the poorest households and its environmental commitments.
The Labour Government introduced Winter Fuel Payments for people aged over 60 and, in its first major piece of energy legislation, passed the Utilities Act 2000. This legislation implemented a licensing system for energy suppliers and created the Gas and Electricity Market Authority and Ofgem as a regulator, and the Gas and Electricity Consumer Council (known as Energywatch) as a statutory body with responsibility for protecting and promoting the interests of gas and electricity consumers in Great Britain.
In 1999, the process of full liberalisation of the gas and electricity markets had been completed when all UK households were able to switch their gas or electricity supplier. Households were encouraged to save money on their gas and electricity bills by switching between different energy providers, with about a third of gas and electricity customers switching between 1998 and 2003. By the mid-2000s, the market was dominated by what became known as the Big Six energy suppliers, constisting of British Gas, EDF Energy, E.ON, npower, Scottish Power, and SSE.
Parliament also passed the Warm Homes and Energy Conservation Act 2000, a private member's bill introduced by Conservative MP David Amess, which set out the Government's Fuel Poverty Strategy - defining "fuel poverty" as any household living on a lower income in a home which cannot be kept warm at reasonable cost - with a commitment to eliminate fuel poverty by 2016.
In 2008, Ofgem launched its Energy Supply Probe as its first major investigation of competition in the electricity and gas markets since the full liberalisation of the two markets. The Probe found there were a range of features in these markets that weakened competition, but found no evidence of a cartel or that retail energy price rises could not be justified by wholesale costs.
2010 to present
In the run-up to the 2010 election, the Labour Government passed the Energy Act 2010. Among other reforms, this introduced the Warm Home Discount scheme, which came into effect in 2011, and which placed a legal obligation on larger energy suppliers to deliver support to people living in fuel poverty or in a fuel poverty risk group. This replaced a number of other schemes giving reduced tariffs to some low-income customers.
Partly in response to increasing concerns about the pricing of energy tariffs by suppliers, Ofgem followed up its Energy Supply Probe with a Retail Market Review, which it launched in November 2010.  The review found that complexity in the gas and electricity markets was a barrier to consumers and competition. It found that 75% of consumers were on their supplier's standard "evergreen" tariffs (also called "Standard Variable Tariffs" or SVTs), the more expensive default option than fixed-term tariffs that would save them money over a set period of time. It also found that that energy prices tended to rise in response to wholesale cost increases more quickly than they fell with decreases, and that competition was weakened by significant barriers that were preventing new suppliers from entering the market. They proposed a series of measures including changing some license conditions of suppliers, to make pricing more transparent and reduce barriers for new suppliers to compete for customers, as well as working to improve consumer trust in price comparison websites.
The Coalition Government elected in 2010 published their own white paper on energy in 2011, which focused on decarbonisation and security of supply, but which backed Ofgem's findings and proposed reforms. Advocates for further reform included the consumer group Which? and Consumer Focus (later Consumer Futures), the statutory body formerly known as Energywatch.
The Government later announced its intention to force energy suppliers to offer their cheapest tariffs to consumers, and subsequently made amendments in the Energy Act 2013 to give Ofgem greater powers. In 2014, the Government amended the legislative Fuel Poverty Strategy for England to target improving as many fuel poor homes as is reasonably practicable to a minimum energy efficiency rating of Band C, by the end of 2030.
On 24 September 2013, the Leader of the Labour Party and former Secretary of State for Energy, Ed Miliband, announced plans to freeze energy bills for 20 months if Labour won the next general election, saying the move would save average households £120 and businesses £1,800.  The announcement was criticised by energy suppliers, and labelled "Marxist" and potentially "catastrophic" by the Government, but was supported by around two-thirds of the British public.
By the end of the year, the Government acknowledged that there was largescale dissatisfaction among the British public about the perception that the large energy suppliers were overcharging their customers.
After working with the Office of Fair Trading and the newly established Competition and Markets Authority (CMA), to again assess competition in the energy market, on 26 June 2014, Ofgem referred the energy market in Great Britain to the CMA for an investigation. An interim report by the CMA, published in 2015, claimed that energy suppliers were overcharging customers by as much as £1.7 billion. The CMA's findings and proposed remedies, published in 2016, included a price cap for energy customers who were on prepayment meters - but were widely criticised for not going far enough.
By March 2017, Citizens Advice, which had taken on the funding and responsibilities of Consumer Futures to advocate for energy consumers, was calling for the Government to extend the prepayment meter cap to more low-income households.
In the run-up to the 2017 general election, Prime Minister Theresa May made a commitment that the Conservative Party manifesto would include a policy to apply price controls to energy bills. May wrote in The Sun newspaper, saying that "the energy market is not working for ordinary working families" and that if she was re-elected she would introduce a price cap policy that would save households up to £100 each.
Despite reported pressure from other members of her Cabinet to change the policy after the election result forced May to form a minority government, the Prime Minister reiterated her commitment to her flagship energy policy in a speech at Conservative Party Conference in October 2017. It was announced that the price cap, or "safeguard tariff", would be implemented by Ofgem and would cap prices for electricity and gas for 11 million households on standard variable tariffs.
The Domestic Gas and Electricity (Tariff Cap) Bill 2018 was introduced in legislation and had its first reading on 26 February 2018, following a period of pre-legislative scrutiny from the cross-party Department for Business, Energy and Industrial Strategy Select Committee. The legislation completed its passage through Parliament on 18 July 2018 and received Royal Assent the next day.
The Tariff Cap Act stipulated that the price cap would be in place from the end of 2018 until 2020, when Ofgem would recommend whether the cap should remain on an annual basis up to 2023. Ofgem would also review the level of the cap at least every 6 months while it is in place.
In September 2018, Ofgem proposed that the initial level of the "default tariff price cap" would mean that energy suppliers would not be allowed to charge more than £1,136 a year for a typical dual fuel customer paying by direct debit, and that this would save than 11m British households on default or standard variable tariffs an average of £75 a year on their gas and electricity bills.
The price of the cap is set for each unit of gas and electricity used (‘kWh’) plus a daily standing charge so that it varies with consumption. Ofgem designed the cap level to take into account several different factors: wholesale energy costs (how much a supplier has to pay to get the gas and electricity to supply households with energy), energy network costs (the regional costs of building, maintaining and operating the pipes and wires that carry energy across the country), policy costs (the costs related to government social and environmental schemes to save energy, reduce emissions and encourage take-up of renewable energy), operating costs (the costs incurred for suppliers to deliver billing and metering services, including smart metering), payment method uplift allowance (the additional costs incurred through billing customers with different payment methods), headroom allowance (allowing suppliers to manage uncertainty in their costs), Earnings Before Interest & Taxes, or "EBIT" (a rate of return on suppliers’ investments), and VAT (5% tax added to the level of the tariff).
In November 2018, Ofgem finished its consultation and published its decision that the first level of the cap would be set at £1,137 a year for a typical direct debit dual fuel bill in November 2018.
The energy price cap then came into force from 1 January 2019. At its initial level, the cost of electricity for those on default tariffs was capped at 17p per kWh, with gas was capped at 4p per kWh. Dual fuel users would pay no more than £177 a year for a standing charge, electricity-only users would pay no more than £83, and gas users £94.
The first change in the level of the price cap was announced in February 2019, with the cap level rising by £117 for typical direct debit dual fuel bills from 1 April 2019, a rise that Ofgem .
In October 2020, the Government extended the energy price cap by a year, until at least the end of 2021.
Energy supply and decarbonisation policy history
Early 2000s: climate change rises up the agenda
In 2005, the Chancellor Gordon Brown commissioned Nicholas Stern to look into the economics of climate change. The influential Stern Report concluded that climate change was the "greatest and widest-ranging market failure ever seen".
Joining over 170 other nations, the UK committed to reduction of carbon dioxide emissions, with consequent constraints to its energy policy. The UK produced four percent of the world's greenhouse gases as of 2003, compared to 23 percent by the US and 20 percent for the rest of Europe. The long-term reduction goal for carbon emissions is 80 percent decrease by 2050. A scheme of trading for carbon emission credits has been developed in Europe that will allow some of the reduction to arise from economic transactions.
Road transport emissions reduction has been stimulated since 1999 by the banding of Vehicle Excise Duty. Bands for new vehicles are based on the results of a laboratory test, designed to calculate the theoretical potential emissions of the vehicle in grammes of CO2 per kilometre travelled, under ideal conditions.
The UK government has one project in the planning stage for natural gas fed power generation with carbon capture by seawater. This facility is contemplated at Peterhead, Scotland, a relatively remote exposure to the North Sea.
Prof Kevin Anderson raised concern about the growing effect of air transport on the climate in a paper and a presentation in 2008. Anderson holds a Chair in Energy and Climate Change at the School of Mechanical, Aerospace and Civil Engineering at the University of Manchester in the UK. Anderson claims that even at a reduced annual rate of increase in UK passenger air travel and with the government's targeted emissions reductions in other energy use sectors, by 2030 aviation would be causing 70% of the UK's allowable CO2 emissions.
Energy White Paper, 2003
The UK Government published its White Paper on Energy ("Our Energy Future – creating a Low Carbon Economy") in 2003, establishing a formal energy policy for the UK for the first time in 20 years. Essentially, the White Paper recognised that a limitation of carbon dioxide (CO2 – the main gas contributing to global climate change) was going to be necessary. It committed the UK to working towards a 60% reduction in carbon dioxide emissions by 2050, and identified business opportunities in so doing: a recurrent theme throughout the document was "cleaner, smarter energy". It also claimed to be based on four pillars: the environment, energy reliability, affordable energy for the poorest and competitive markets.
The White Paper focused more on analysing the issues than in providing detailed policy responses. Some detail began to filter through in a series of follow-on documents, including an Energy Efficiency Implementation Plan (April 2004) and the DTI Microgeneration Strategy "Our Energy Challenge" (March 2006). Nonetheless, most of the policies were a continuation of business as usual, with emphasis on market-led solutions and an expectation that consumers act rationally, for example in installing energy efficiency measures to make running cost savings.
In November 2005 it was announced that the Government, under DTI leadership, would undertake a full scale Energy Review, and over 500 organisations and individuals made detailed submissions as part of this review. Officially, the review was to take stock of the outcomes to date of the White Paper, which a particular focus on cutting carbon (emissions of which remained stubbornly high) and to look in more detail at security of supply, as the UK's oil and gas production from the North Sea had peaked, and Russia was seen as being a high-risk supplier of gas.
Unofficially, it was widely felt that the real reason behind the review was to allow nuclear power back into the energy debate, as it had been sidelined in the 2003 White Paper. That document had said "This white paper does not contain specific proposals for building new nuclear power stations. However we do not rule out the possibility that at some point in the future new nuclear build might be necessary if we are to meet our carbon targets. Before any decision to proceed with the building of new nuclear power stations, there will need to be the fullest public consultation and the publication of a further white paper setting out our proposals." The Energy Review was therefore to be this public consultation.
Energy Review, 2006
In the light of a fast changing world energy context, increasing dependence on oil and gas imports, concerns about carbon emissions, and a need to accelerate investment in electricity infrastructure and power stations the UK Government undertook the 2006 Energy Review. One aspect of the 2006 Review dealt with development of nuclear power. Greenpeace challenged the Government's process of consultation on proposals to develop nuclear power and following a judicial review requested by Greenpeace, on 15 February 2007 the consultation process was ruled 'seriously flawed', and 'not merely inadequate but also misleading'. As a result, plans to build a new generation of nuclear power plants were delayed while the UK Government reran the consultation process in a way that complied with the court's decision. See Nuclear power in the United Kingdom for details.
The Energy Review Report 2006 came out as a broader and more balanced document than critics (in advance) had expected. It started by reiterating the Government's four long-term goals for energy policy:
- To put the UK on a path to cut carbon dioxide emissions by some 60% by about 2050, with real progress by 2020;
- To maintain reliable energy supplies;
- To promote competitive markets in the UK and beyond, helping to raise the rate of sustainable economic growth and to improve productivity; and
- To ensure that every home is adequately and affordably heated.
It then identified two major long-term energy challenges:
- Tackling climate change, along with other nations, as global carbon emissions from human activity continue to grow; and
- Delivering secure, clean energy at affordable prices, as we become increasingly dependent on imports for our energy needs.
The Review took an internationalist response, stressing that the world's economies need to get on a path to being significantly less carbon-intensive, and noting rising global demand, especially from countries such as India and China. This means using less energy in products and services and changing the way energy is produced so that more of it comes from low-carbon sources. It also identified the need for a fairer distribution of energy around the world, and identified that many resources, especially of fossil fuels which are concentrated in just a few countries.
It placed its main concerns and proposals into three groups:
The starting point for reducing carbon emissions is to save energy. The challenge is to secure the heat, light and energy we need in homes and businesses in a way that cuts the amount of oil, gas and electricity used and the carbon dioxide emitted. Actions proposed include:
- Increasing information, e.g. through Home Information Packs
- Raising basic standards, removing inefficient goods from the market
- Making best use of the EU Emissions Trading Scheme and Climate Change Levy
- Making the Government estate carbon neutral by 2012
- Increasing the focus on energy efficient transport
Cost-effective ways of using less energy will help move towards the carbon reduction goal. But on their own they will not provide the solution to the challenges faced: there is also a need to make the energy used cleaner. Under this head, the Government considered:
- more distributed energy generation including low-carbon heat
- more use of community based systems, including CHP
- a strong commitment to carbon pricing in the UK, through improving the operation of the EU Emissions Trading Scheme
- a strengthened commitment to the Renewables Obligation
- proposals for reform of the planning regime for electricity projects
- a clear statement of our position on new nuclear build
- support for carbon capture and storage
- developing alternative fuels for transport
The Energy Security Challenge
The challenges of reducing carbon emissions and ensuring security of supply are closely linked. Security of supply requires that we have good access to available fuel supplies, the infrastructure in place to transport them to centres of demand and effective markets so that supply meets demand in the most efficient way. Many of the measures already described for tackling carbon emissions also contribute to the healthy diversity of energy sources that is necessary for meeting the energy security challenge.
There are two main security of supply challenges for the UK:
- Managing increased dependence on oil and gas imports, especially in the light of the global distribution of energy reserves and growing international demand; and
- Ensuring that the market delivers substantial and timely investment in electricity generating capacity and networks so that households and businesses have the electricity they need at affordable prices.
The Government's response is to continue to open up markets and to work internationally to develop strong relationships with suppliers, developing liberalised markets.
So where does nuclear power fit within this debate? Although it is mentioned a lot more in the Review compared to the White Paper (441 times, compared to 55 to be exact), the Government does not propose building new stations itself. Instead, it will leave it to the market, although it will ease some of the planning constraints (which it also aims to do for renewables) and look into providing a design authorisation procedure. As with many other aspects of the Energy Review Response, the document is not likely to be the last word on the subject, as there are plans for further consultation, and the establishment of further reviews and studies in issues such as identifying suitable sites, and managing the costs of decommissioning and long term waste management.
Energy White Paper, 2007
The 2007 Energy White Paper: Meeting the Energy Challenge was published on 23 May 2007. The 2007 White Paper outlines the Government's international and domestic strategy for responding to two main challenges:
- cutting carbon emissions to tackle global warming
- ensuring secure, clean and affordable energy as imports replace declining production from North Sea oil and gas
It seeks to do this in a way that is consistent with its four energy policy goals:
- cutting the UK's carbon dioxide emissions by some 60% by about 2050, with real progress by 2020;
- maintaining the reliability of energy supplies;
- promoting competitive markets in the UK and beyond, helping to raise the rate of sustainable economic growth and to improve productivity; and
- ensuring that every home is adequately and affordably heated.
The paper anticipates that it will be necessary to install 30–35 GW of new electricity generation capacity within 20 years to plug the energy gap resulting from increased demand and the expected closure of existing power plants. It also states that, based on existing policies, renewable energy is likely to contribute around 5% of the UK's consumption by 2020, rather than the 20% target mentioned in the 2006 Energy Review.
Proposed Energy Strategy
In summary, the government's proposed strategy involves 6 components:
- Establishing an international framework to tackle climate change, including the stabilisation of atmospheric greenhouse gas concentrations and a stronger European Union Emissions Trading Scheme
- Providing legally binding carbon targets for the whole UK economy, reducing emissions through the implementation of the Climate Change Bill.
- Making further progress in achieving fully competitive and transparent international markets, including further liberalisation of the European Union energy market.
- Encouraging more energy saving through better information, incentives and regulation
- Providing more support for low carbon technologies, including increased international and domestic public-private sector collaboration in the areas of research, development, demonstration and deployment – for example though the launch of the Energy Technologies Institute and the Environmental Transformation Fund.
To achieve the government's aims, the White Paper proposes a number of practical measures, including:
- A new mandatory cap and trade scheme for organisations consuming more than 6,000 MWh of electricity per year, to be known as the Carbon Reduction Commitment.
- The introduction of Energy Performance Certificates for business premises and Display Energy Certificates for public sector organisations.
- The extension of smart metering to most business premises within 5 years.
- A requirement for all new homes to be zero-carbon buildings as soon as practically possible and preferably by 2016.
- Improving the energy efficiency of existing homes.
- Improving the efficiency of consumer electronics and domestic appliances, and the possible phase-out of inefficient light bulbs by around 2011.
- Increasing the Carbon Emission Reduction Target for the electricity and gas industries for 2008–2011.
- A requirement that new domestic electricity meters should have real time displays from 2008, and a commitment to upgrade existing domestic meters on request.
- The introduction of a Low Carbon Transport Innovation Strategy
- Support for including aviation within the EU Emissions Trading Scheme
- The introduction of a Biomass Strategy to expand the use of biomass as an energy source.
- Measures to grow distributed electricity generation and distributed heat generation alongside the centralised system.
- A reconfirmation that, under the Renewables Obligation, renewable energy should supply 10% of electricity generation by 2010, an 'aspiration' to achieve 20% by 2020, together with the introduction of bands within the Obligation to support different renewable technologies.
- The launch in November 2007 of a competition to demonstrate commercial-scale carbon capture and storage technology
- A 'preliminary view is that it is in the public interest to give the private sector the option of investing in new nuclear power stations'. A consultation on this was launched at the same time as the White Paper.
- The introduction of the Renewable Transport Fuel Obligation in 2008–2009, with a commitment that biofuels should provide 5% of transport fuel by 2010–2011.
- Measures to support the recovery of the remaining oil and gas reserves from the North Sea.
- Removing barriers to developing new energy infrastructure and power plants through reform of planning permission processes, as detailed in the 2007 Planning White Paper: Planning for a Sustainable Future.
Response of the Scottish Government
The Scottish Government responded to the UK government paper by making clear that it was against new nuclear power stations being built in Scotland and had the power to prevent any being built. In a statement to parliament, Energy Minister Jim Mather stated "Members will be aware that Greenpeace, backed by the courts, have forced the UK Government to consult properly on the future role of nuclear power. We will respond and we will make clear that we do not want and do not need new nuclear power in Scotland. If an application were to be submitted for a new nuclear power station that will be for Scottish Ministers to determine. We would be obliged to look at it – but given our policy position, our generating capacity, our multiplicity of energy sources and our strong alternative strategies such an application would be unlikely to find favour with this administration."
Climate Change Act, 2008
On 13 March 2007, a draft Climate Change Bill was published following cross-party pressure over several years, led by environmental groups. The Act puts in place a framework to achieve a mandatory 80% cut in the UK's carbon emissions by 2050 (compared to 1990 levels), with an intermediate target of between 26% and 32% by 2020. The Bill was passed into law in November 2008. With its passing the United Kingdom became the first country in the world to set such a long-range and significant carbon reduction target into law, or to create such a legally binding framework.
In April 2009 the Government set a requirement for a 34% cut in emissions by 2020, in line with the recommendations of the Committee on Climate Change, and announced that details of how this would be achieved would be published in the summer.
UK Low Carbon Transition Plan, 2009
Published on 15 July 2009, the UK Low Carbon Transition Plan details the actions to be taken to cut carbon emissions by 34% by 2020, based on 1990 levels (of which 21% had been achieved at the time of publication). As a result, by 2020 is it envisaged that:
- Over 1.2 million people will be employed in green jobs.
- The efficiency of 7 million homes will have been upgraded, with over 1.5 million of them generating renewable energy.
- 40% of electricity will be generated from low carbon sources (renewables, nuclear power and clean coal).
- Gas imports will be 50% lower than would otherwise have been the case.
- The average new car will emit 40% less carbon compared to 2009 levels.
Energy Bill, 2012–2013
The Energy Bill 2012–2013 aims to close a number of coal power stations over the next two decades, to reduce dependence on fossil fuels and has financial incentives to reduce energy demand. The construction of a new generation of nuclear power stations will be facilitated, helped by the establishment of a new Office for Nuclear Regulation. Government climate change targets are to produce 30% of electricity from renewable sources by 2020, to cut greenhouse gas emissions by 50% on 1990 levels by 2025 and by 80% on 1990 levels by 2050.
Select Committee report, 2016
The Energy and Climate Change Select Committee reported on 15 October 2016 on upcoming challenges for energy and climate policy. The committee recommended investment in energy storage on the supply side and in efficiency technologies that smooth out demand peaks, by switching devices off and on and running them at lower power during times of stress, for example.
Salix Finance Ltd.
Salix Finance Ltd. provides Government funding to the public sector to improve energy efficiency, reduce carbon emissions and lower energy bills. Salix is a non-departmental public body, owned wholly by Government, and funded by the Department for Business, Energy and Industrial Strategy, the Department for Education, the Welsh Government and the Scottish Government.
Implementing Policy: Government oversight
Government supervision of the coal, gas and electricity industries was established in the nineteenth century. Since then specific departments of state and regulatory bodies have had responsibility for policy implementation, regulation and control.
The supply of energy in the nineteenth century – in the form of coal, gas and electricity – was largely by private companies and municipal gas and electricity undertakings. Public control of these supplies was generally in the hands of local authorities. Such control was exercised through limiting prices and dividends and by encouraging competition. State intervention was through legislation such as the Mines and Collieries Act 1842, and the Gasworks Clauses Act 1847 which restricted company dividends to ten per cent. The Electric Lighting Act 1882 established control over electricity supply industry from its earliest days. It required undertakings to obtain a License or Order from the Board of Trade to generate and supply electricity. The Board of Trade and the Home Office therefore provided early oversight and control of the energy industries.
New Government bodies
Between 1919 and 1941 the newly created Ministry of Transport assumed control of the electricity industry. Under wartime conditions the Ministry of Fuel and Power was established in 1942 to coordinate energy supplies. UK Government policy was enacted through a succession of Ministries and Departments. These are summarised in the following table.
|Regulatory Body||Established||Abolished / Status||Political party||Tenure from||Tenure to||Note|
|Board of Trade||–||Continued||Various||c. 1847||1942||Gas & electricity industries|
|Home Office||–||Continued||Various||1842||1920||Coal industry|
|Ministry of Transport||1919||Continued||Various||1919||1941||Electricity supply only|
|Board of Trade (Secretary for Mines)||1920||1942 transferred to Ministry of Fuel and Power, Board of Trade continued||Various||1920||1942|
|Board of Trade (Secretary for Petroleum)||1940||1942 transferred to Ministry of Fuel and Power, Board of Trade continued||National||1940||1942|
|Board of Trade||–||October 1970 became DTI||National||1941||1942|
|Ministry of Fuel and Power||3 June 1942||13 January 1957 renamed Ministry of Power||National||June 1942||July 1945|
|Labour||August 1945||October 1951|
|Conservative||October 1951||January 1957|
|Ministry of Power||13 January 1957||6 October 1969 merged with Ministry of Technology||Conservative||January 1957||October 1964|
|Labour||October 1964||October 1969|
|Ministry of Technology (MinTech)||18 October 1964||15 October 1970||Labour||October 1969||June 1970|
|Conservative||June 1970||October 1970|
|Department of Trade and Industry (DTI)||15 October 1970||January 1974 transferred to DoE, DTI continued||Conservative||October 1970||January 1974|
|Department of Energy||8 January 1974||11 April 1992||Conservative||January 1974||March 1974|
|Labour||March 1974||4 May 1979|
|Conservative||May 1979||April 1992|
|Department of Trade and Industry||(11 April 1992)||June 2007 transferred to BERR, DTI continued||Conservative||April 1992||May 1997|
|Labour||May 1997||June 2007|
|Department of Business, Enterprise and Regulatory Reform||28 June 2007||October 2008 transferred to DECC 2008, BERR continued||Labour||June 2007||October 2008|
|Department of Energy and Climate Change||3 October 2008||14 July 2016||Labour||October 2008||May 2010|
|Coalition||May 2010||May 2015|
|Conservative||May 2015||July 2016|
|Department for Business, Energy & Industrial Strategy||14 July 2016||current||Conservative||July 2016||current|
Other Statutory bodies
In addition to the above Ministries and Departments a number of Regulatory bodies have been established to regulate and supervise specific aspects of energy policy and operation. These include:
- HM Inspectorate of Mines (1842–date),
- Electricity Commissioners (1919–48) to secure regional coordination,
- Central Electricity Board (1926–48) to control supplies and construct own and operate the national grid,
- National Coal Board (1947–87), owned and managed coal mining industry,
- British Electricity Authority (1948–55) to own and operate electricity generation and transmission,
- Gas Council (1948–1973), to provide supervisory and advisory function on policy,
- Central Electricity Authority (1955–57) to own and operate electricity generation and transmission outside Scotland,
- Electricity Council (1958–1990), provide supervisory and advisory function on policy,
- Office of Electricity Regulation (Offer) (1990–2000), economic regulator independent of government,
- Office of Gas Supply (Ofgas) (1986–2000), economic regulator independent of government,
- Office of Gas and Electricity Markets (Ofgem) (2000– date), to protect the interests of consumers, where possible by promoting competition,
- Gas and Electricity Markets Authority (GEMA) (2000– date),
- Offshore Regulator for Environment and Decommissioning (OPRED),
- Oil and Gas Authority (2015–date), to regulate, influence and promote the UK oil and gas industry to maximise the economic recovery of resources.
Fossil energy public support
Renewable energy targets
The UK Government's goal for renewable energy production is to produce 20% of electricity in the UK by 2020. The 2002 Energy Review set a target of 10% to be in place by 2010/2011. The target was increased to 15% by 2015 and most recently the 2006 Energy Review further set a target of 20% by 2020.
For Scotland, the Scottish Government has a target of generating 100% of electricity from renewables by 2020. Renewables located in Scotland count towards both the Scottish target and to the overall target for the UK.
Although renewable energy sources have not played a major role in the UK historically, there is potential for significant use of tidal power and wind energy (both on-shore and off-shore) as recognised by formal UK policies, including the Energy White Paper and directives to councils in the form of PPS 22. The Renewables Obligation acts as the central mechanism for support of renewable sources of electricity in the UK, and should provide subsidies approaching one billion pounds sterling per annum by 2010. A number of other grants and smaller support mechanisms aim to support less established renewables. In addition, renewables have been exempted from the Climate Change Levy that affects all other energy sources.
The amount of renewable generation added in 2004 was 250 megawatts and 500 megawatts in 2005. There is also a program established for micro-generation (less than 50 KWe (kilowatt electrical) or 45 KWt (kilowatt thermal) from a low carbon source) as well as a solar voltaic program. By comparison both Germany and Japan have photovoltaic (solar cell) programmes much larger than the installed base in the UK. Hydroelectric energy is not a viable option for most of the UK due to terrain and lack of force of rivers.
The government has established a goal of five percent of the total transport fuel that must be from renewable sources (e.g. ethanol, biofuel) by 2010 under the Renewable Transport Fuel Obligation. This goal may be ambitious, without the necessary infrastructure and paucity of research on appropriate UK crops, but import from France might be a realistic option (based upon the French wine lake).
In 2005 British Sugar announced that it will build the UK's first ethanol biofuel production facility, using British grown sugar beet as the feed stock. The plant in Norfolk will produce 55,000 metric tonnes of ethanol annually when it is completed in the first quarter of 2007. It has been argued that even using all the UK's set-aside land to grow biofuel crops would provide less than seven per cent of the UK's present transport fuel usage.
Reducing occurrence of fuel poverty (defined as households paying over ten percent of income for heating costs) is one of the four basic goals of UK energy policy. In the prior decade substantial progress has been made on this goal, but primarily due to government subsidies to low-income families rather than through fundamental change of home design or improved energy pricing. The following national programs have been specifically instrumental in such progress: Winter Fuel Payment, Child Tax Credit and Pension Credit. Some benefits have resulted from the Warm Front Scheme in England, the Central Heating Programme in Scotland and the Home Energy Efficiency Scheme in Wales. These latter programs provide economic incentives for physical improvement in insulation, etc.
The UK is largely supportive of renewable energy and this is primarily driven by concerns about climate change and dependence on fossil fuels.
- 74% of participants were very or fairly concerned about climate change.
- 82% were worried about the UK becoming too dependent upon energy from other countries.
- 79% wanted to see a reduction in the use of fossil fuels over the next few decades.
- 81% expressed a desire to reduce their energy use.
- 85% supported solar energy.
- 75% supported wind energy.
- 42% had never heard of carbon capture and storage (CCS) and when given further information many expressed concern, viewing it as a "non transition" – a continuation of unsustainable practices associated with fossil fuels.
- The public was undecided on the role of nuclear power in the future energy mix. Over half (54%) said they would oppose the building of a new nuclear power station in their area.
- A majority (53%) were willing to use electric vehicles, rising to 75% if they performed as well as conventional models.
This can be compared with a similar study from the 1st Annual World Environment Review, published in June 2007, which revealed that:
- 81% are concerned about climate change.
- 79% think their Government should do more to tackle global warming.
- 73% think that the UK is too dependent on fossil fuels.
- 77% think that the UK is too reliant on foreign oil.
- 87% think that a minimum 25% of electricity should be generated from renewable energy sources.
- 24% think that the Government should do more to expand nuclear power.
- 56% are concerned about nuclear power.
- 76% are concerned about carbon dioxide emissions from developing countries.
- 61% think it appropriate for developed countries to demand restrictions on carbon dioxide emissions from developing countries.
In their October 2009 report, the Government-funded UK Energy Research Centre (UKERC) noted that the implications of reaching the peak of world oil production had, until the late 2000s, caused little concern among the world's governments. The UKERC report concluded that this peak could be expected before 2030, but that there is a 'significant risk' of a peak before 2020. The UK Government has no contingency plans for oil peaking before 2020.
The UKERC report's authors warn of the risk that 'rising oil prices will encourage the rapid development of carbon-intensive alternatives (such as coal) which will make it difficult or impossible to prevent dangerous climate change' and that 'early investment in low-carbon alternatives to conventional oil is of considerable importance' in avoiding this scenario. It is suggested that the current measures being established to address climate change may not be sufficient or rapid enough to address the challenges of peak oil, but that it will require 'both improved understanding and much greater awareness of the risks presented by global oil depletion' for further action to become politically feasible.
Analysis and criticism
A 2016 paper argues that current UK energy policy is a contradictory mix of free market policies and government interventions, with an undue emphasis on electricity. It concludes that the government needs to develop a clearer strategy if it is to address the three goals of economic effectiveness, environmental protection, and energy security.
- UK only
- United Kingdom National Renewable Energy Action Plan, 2009
- Climate change in the United Kingdom
- Energy efficiency in British housing
- Energy switching services in the UK
- List of renewable resources produced and traded by the United Kingdom
- Merton Rule
- Timeline of the UK electricity supply industry
- UK Energy Research Centre
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In the media
- 23 May 2007, BBC, Britain's energy strategy
- 6 September 2006, New Builder, Extra Funding For Scottish Renewables
- 25 July 2006, epolitix.com, House of Lords committee reject European Commission bid for role in energy policy
- 29 June 2006, BBC, Government promises carbon cuts
- 5 June 2006, epolitix.com, Alistair Darling: Electricity profits should be linked to efficiency
- 26 September 2005, BBC, UK needs yearly climate updates
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