The Energy Bill will give more power to the Big Six

24th December 2012

Last week Members of Parliament (MPs) debated the Government’s new Energy Bill. It should be a golden opportunity to develop clean energy and break the stranglehold of the Big Six energy companies on the UK power market. But the Coalition’s proposals as they stand could make it virtually impossible for community groups to set up renewable energy projects, and could hand the Big Six even more control than they have already.

[flickr id=”8304016137″ thumbnail=”original” overlay=”true” size=”original” group=”” align=”left”] The Government has rejected advice to establish a simple system, such as that used in Germany, of fixed payments through Feed-in Tariffs that would offer an even playing field to community energy schemes as well as multinational corporations. Thanks to campaigning by organisations like Friends of the Earth, the UK did introduce a Feed-In Tariff in 2010. But it is limited to small-scale projects up to 5MW and the Coalition’s current plans won’t increase this. Incentives for larger renewable energy schemes like wind farms and solar arrays may only be available for very big power companies that can trade directly on electricity markets.

Following pressure from independent companies, the Government has conceded a clause in the Energy Bill that could force electricity suppliers to offer long-term contracts to supply electricity, called ‘power purchase agreements’ (PPAs), to independents. However, in practice, when PPAs are issued to independents, the electricity suppliers often keep a large share of the market value of the renewable generation. “The (long term) PPA is likely to generate a lot less income than would be gained on the short-term power markets”, says Annette Heslop (Director of community wind company Energy4All).

Critics argue that the proposed Contracts for Difference will allow the Big Six to use the complexity to make extra profits from renewable energy – compared to a Feed-in Tariff system that would be fairer to independents. A report written last year by Cambridge University Professor David Newbery estimated that by 2020, the Government’s proposed contracts are likely to cost £70 million a year more for onshore wind farms alone, compared to a Feed-in Tariff system.

It’s clear that we need a radical rethink on the way to develop renewable energy. MPs will return to debating the Energy Bill next year. They need to give it a thorough going-over – ensuring that it firstly includes a target to clean up our electricity system by 2030, and secondly introduces a large-scale Feed-in Tariff. This will open up Britain’s energy market to smaller suppliers, and deliver the clean energy we badly need to cut emissions and tackle climate change.

Friends of the Earth has recently published a report by Dr David Toke (Senior Lecturer in Energy Policy at the University of Birmingham) that makes a strong case for how Fixed Feed-in Tariffs can help renewable energy, and particularly community renewable energy schemes, grow in the UK. A Proven Solution: How to grow renewables with a Fixed Feed-In Tariff.