UK risks "botching" clean energy market reform: MPs
LONDON (Reuters) - The British government's proposals to decarbonise the country's electricity market are flawed and ministers should rework the suggested market mechanism over the summer to salvage the reform, an influential group of politicians said on Monday.
The Electricity Market Reform (EMR) is the biggest shake-up of Britain's power market since privatisation in the early 1990s with a mission to help attract around 110 billion pounds needed for low-carbon energy projects by 2020 in a bid to achieve the government's goal of reducing carbon emissions by 34 percent.
"The government is in danger of botching its plans to boost clean energy, because the Treasury is refusing to back new contracts to deliver investment in nuclear, wind, wave and carbon capture and storage," said Tim Yeo, chair of the Energy and Climate Change Committee, a group of Members of Parliament (MPs) who scrutinise the government's work on energy.
The Department of Energy and Climate Change (DECC) has proposed to guarantee producers of low-carbon energy, including nuclear power, a minimum price for electricity, also known as contracts-for-difference (CFDs) as generators would repay consumers when market prices rise above the agreed level.
The parliamentary committee found in its evidence gathered by interviewing key stakeholders such as utilities, academics, energy lobby groups and the energy ministers themselves that Britain's finance department was apparently blocking a proposal for the state to guarantee these contracts.
Instead, it wants the contract liability spread across various energy companies.
"The Treasury's block on reforms to the UK's electricity system threatens to keep the nation hooked on increasingly expensive fossil fuels for decades," said Andrew Pendleton, head of campaigns at environmental lobby group Friends of the Earth, in reaction to the committee's report.
The MPs also said limiting the number of CFDs under the Treasury's Levy Control Framework, which caps DECC's overall spending, will increase project development risk and deter investors.
The government should instead hold a pre-registration round so that investors know as soon as possible whether their projects will receive CFDs or not.
The parliamentary group also found fault with the way the government was negotiating a CFD strike price for nuclear plants, talks for which have already started with Britain's largest nuclear investor, France's EDF.
"In a bilateral negotiation where there is only one player in the room and that player can say, 'Take it or leave it; these are our terms', I have very little confidence that that is an efficient way of deriving a price," said Richard Hall, head of energy regulation at Consumer Focus, in evidence to the committee.
The government should appoint an independent panel of experts to oversee negotiations, the MPs recommended.
Britain's Energy and Climate Change Secretary Edward Davey said he was determined to develop a robust and effective Energy Bill.
"The Committee's input will be extremely valuable as we do this," he said in a statement.
(Reporting by Karolin Schaps; editing by Keiron Henderson)
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