DECC’s recent five-year plan report drives towards delivering “an energy infrastructure fit for the 21st Century.” There are no serious surprises. There was a marked emphasis on nurturing competition and supporting new technologies. And just as the government scales back its solar and onshore wind support, it will push for “ambitious international action on climate change to safeguard our long-term economic and national security.” Developers of UK utility-scale solar projects, over 5MW in size, are doubtless perplexed.
DECC is prioritising building a resilient system, keeping bills low, driving international climate action and cost-effectively lowering emissions at home. It will continue driving gas plants’ participation in its capacity market auctions, nuclear plant expansion, the development of energy smart technologies and the right shale gas projects. In a move that will antagonise green groups and lobbyists, the plan confirms it will not encourage the development of further onshore sites as it moves towards removing coal from its generation mix by 2025. It will in place persist with its plans to encourage new gas-fired generation though. £500m will likewise be set aside for clean tech innovations, with a particular focus on modular nuclear reactors.
The government targeted spending £7.6bn on the Levy Control Framework, the overarching mechanism financially supporting the renewables sector and its decarbonisation plans, by 2020 but it confirmed it was on course to exceed this figure by £1.4bn. The reports suggests that consumers will save approximately £500m a year by 2020 thanks to the premature end to solar and onshore wind subsidies. The plan indicates that 2.1m smart meters are already in operation and that DECC will persist with its plan to complete a full national roll-out by 2020. The over-spend is a point of concern, but the continuing support of the overarching legislative framework should bring peace of mind to most investors.
The government will continue standing behind its Climate Change Act. The DECC plan reiterates the government’s intention to lower emissions from heat, with plans to improve its integration of heat and renewable policies. It intends to “bring together heat with energy efficiency in buildings, to reduce carbon through a combination of demand reduction and efficient generation,” the document states. “In the short term we are looking at the performance of boilers and conventional heating systems. We will continue to develop a long-term strategy to drive low carbon and renewable heat through a stable, coherent and affordable framework.” The government appears increasingly anxious to address emissions from its 27m households, which should drive capital into a sector that has – until recently – been hard to finance.
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