Alan Whitehead

The Government continues to view Carbon Capture and Storage (CCS) as having a potential role in the long-term decarbonisation of the UK’s power and industrial sectors. The detailed design and implementation of CCS policy changes are currently being assessed.

The Government continues to view Carbon Capture and Storage (CCS) as having a potential role in the long-term decarbonisation of the UK’s power and industrial sectors. The detailed design and implementation of CCS policy changes are currently being assessed.

We are engaging closely with the two bidders and wider CCS industry on the implications for them of the recent decisions.

I am attending the next meeting of the Carbon Capture and Storage Development Forum later this month.

Officials from the Department, as well as colleagues in the Foreign and Commonwealth Office, are in regular contact with their Canadian counterparts on this and other issues related to Carbon Capture and Storage.

On 4 November 2015, the Government set out proposals to ensure that hydraulic fracturing cannot be conducted from wells drilled at the surface of specified protected areas. [1] With regards to existing Petroleum Exploration and Development Licences, my rt. hon. Friend the Secretary of State is minded not to approve any proposed programme of works which includes carrying out of hydraulic fracturing from new or existing wells drilled at the surface in specified protected areas. We are now consulting with key stakeholders, including the industry and non-governmental organisations and will set out our proposals in a policy statement in due course.

[1] See https://www.gov.uk/guidance/oil-and-gas-licensing-rounds#surface-development-restrictions

The carbon dioxide and NOx emissions produced by fossil fuel power plants are dependent on a number of factors including, thermal efficiency, technology type and design, type and composition of fossil fuel, mode of operation and type of pollution abatement measures implemented.

Using published data on the carbon intensity of different fuel types, combined with estimates for the efficiency of each plant type, the kg CO₂e per kWh of electricity generated and per kWh of fuel is provided in the table below.

Notes

(1) Source: http://www.ukconversionfactorscarbonsmart.co.uk/LandingPage.aspx

(2) Source: Emissions Performance Standard Impact Assessments

(3) Source: STOR Carbon Intensity Report, National Grid

Emissions data on NOx is not readily available but the table below provides the Emission Limit Values for NOx (mg/Nm³) for certain types of fossil fuel plant as set down in the Industrial Emissions Directive and Medium Combustion Plant Directive. NOx emissions from some fossil fuel plant will be higher than these limits currently – the timetable for achieving compliance with the limits and full detail of the conditions and exclusions relating to the limits is contained within the relevant Directives.

Notes:

1. The limits for coal and gas turbines & engines are not directly comparable as they are based on different O₂ contents.

The terms of the Hinkley Point C Contract for difference (HPC CfD) will set out the mechanism for the Opex reopeners. If my rt. hon. Friend the Secretary of State decides to direct the Low Carbon Contracts Company Ltd to offer a CfD to HPC, the terms will be published (with commercially sensitive information removed) once it has been entered in to by the parties. The detailed terms of the HPC CfD are commercially sensitive at this time.

As explained in DECC’s Departmental Minute of 21 October, a political shut down would be an action by a UK, EU or international Competent Authority which shutdown, or prevented the completion of, Hinkley Point C (HPC) – except where this action is done on grounds of protecting health, nuclear safety, security, environmental, nuclear transport or nuclear safeguards related matters. If my rt. hon. Friend the Secretary of State decides to direct the Low Carbon Contracts Company Ltd to offer a Contract for Difference to HPC, the terms of the contract will be published (with commercially sensitive information removed) once it has been entered in to by the parties.

On 4 November 2015, the Government set out proposals to ensure that hydraulic fracturing cannot be conducted from wells drilled at the surface of specified protected areas.¹ The proposed restrictions would be delivered through the inclusion of a licence condition in new Petroleum Exploration and Development Licences (PEDLs) and the development of a policy statement designed to inform the approval process for programmes submitted for approval under existing PEDLs.

The proposals are now subject to consultation with key stakeholders, including the industry and non-governmental organisations.

[1] https://www.gov.uk/guidance/oil-and-gas-licensing-rounds#surface-development-restrictions

I will be writing to hon. Members who have signed EDM 619, in which I will respond to the objection. I will deposit a copy of the response in the Libraries of the House.

On 4 November 2015, the Government set out proposals to ensure that hydraulic fracturing cannot be conducted from wells drilled at the surface of specified protected areas. [1] The proposals are now subject to consultation with key stakeholders, including industry and non-governmental organisations.

[1] See https://www.gov.uk/guidance/oil-and-gas-licensing-rounds#surface-development-restrictions

DECC published projected levy expenditure under the Levy Control Framework (LCF) as part of its Annual Energy Statement in November 2014:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/371387/43586_Cm_8945_accessible.pdf.

The Office of Budgetary Responsibility (OBR) updated these projections in July 2015 showing forecast spend under the LCF was set to be higher than previously expected:

http://cdn.budgetresponsibility.independent.gov.uk/July-2015-EFO-234224.pdf.

The increase in forecast expenditure was due to changes in wholesale prices, accelerated developments in technological efficiency and higher than expected uptake of demand led schemes. We are aiming to publish an updated set of projections later this year.

The Carbon Price Floor (CPF) is a policy led by HM Treasury. In the 2014 Budget, the Carbon Price Support (CPS), the mechanism by which the carbon price floor is delivered, was capped at £18/tCO₂ until 2018/19. DECC analysis on projected levy expenditure under the Levy Control Framework (LCF) to 2020/21 reflects these rates.

DECC published projected levy expenditure under the Levy Control Framework (LCF) as part of its Annual Energy Statement in November 2014:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/371387/43586_Cm_8945_accessible.pdf.

The Office of Budgetary Responsibility (OBR) updated these projections in July 2015 showing forecast spend under the LCF was set to be higher than previously expected:

http://cdn.budgetresponsibility.independent.gov.uk/July-2015-EFO-234224.pdf.

The increase in forecast expenditure was due to changes in wholesale prices, accelerated developments in technological efficiency and higher than expected uptake of demand led schemes. We are aiming to publish an updated set of projections later this year.

The Carbon Price Floor (CPF) is a policy led by HM Treasury. In the 2014 Budget, the Carbon Price Support (CPS), the mechanism by which the carbon price floor is delivered, was capped at £18/tCO₂ until 2018/19. DECC analysis on projected levy expenditure under the Levy Control Framework (LCF) to 2020/21 reflects these rates.

The Contract for Difference is the means of providing support for all low carbon generation including Carbon Capture and Storage (CCS). The Supplier Obligation mechanism is a compulsory levy on electricity suppliers to meet the cost of Contract for Differences. Total funds used for this purpose are managed through the Levy Control Framework (LCF).

We are currently consulting on the future of the Feed-in Tariff and will consider all stakeholder views, including any representations on net metering, as part of the government response. The consultation closes on 23rd October 2015.

The information requested can be found in the following table. This includes new build Capacity Market Units (CMUs) who have obtained 14 or 15 year capacity agreements.

It is the Government’s aim to receive proposals to develop new nuclear power stations on all eight sites listed in the Nuclear National Policy Statement published in 2011. So far we have received formal proposals for new nuclear power stations for five sites – Hinkley (3.3 GW), Wylfa (2.7 GW), Moorside (3.3 GW), Sizewell (3.3 GW) and Oldbury (2.7 GW). We expect all these new nuclear power stations to come into operation during the 2020s and early 2030s. Under the Contract for Difference for Hinkley the Strike Price will be £89.50/MWh (in 2012 prices), or £92.50 if a final investment decision is not taken on Sizewell. It is too soon to say what the Strike Price might be for future projects.

We have extensive contacts with onshore wind developers and have, in recent weeks, received a range of information on investments in projects in the onshore wind pipeline. We will continue to engage with developers, investors and stakeholders as we implement the onshore wind manifesto commitment. We will consider carefully the level of investment that developers are likely to bring forward under the proposals announced by my rt. hon. Friend the Secretary of State on 18 June.

The Renewables Obligation Closure Order 2014 no. 2388 implements some of the policies set out in the March 2014 Government response to the consultation on transition from the Renewables Obligation (RO) to contracts for difference (CfDs), and associated grace periods [1]. It provides for the closure of the RO to new generating capacity in Great Britain (with grace periods) after 31 March 2017, at which point CfDs will become the main support mechanism for large–scale low-carbon electricity generation. The order was amended by the Renewables Obligation Closure (Amendment) Order 2015 No. 920 which provides for the closure of the RO to solar projects above 5MW in Great Britain (with grace periods) after 31 March 2015.

On 18^th June, my rt. hon. Friend the Secretary of State announced plans to close the RO to new onshore wind projects in Great Britain from 31 March 2016, with a proposed grace period. This will be done through the Energy Bill, meaning that any changes will be subject to full Parliamentary scrutiny.

1] ‘ Government Response to the consultation on the Renewables Obligation transition and on grace periods’ (March 2014) at : https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/289076/Transition_and_Grace_Periods_Government_Response_-_12_Mar_2014.pdf.

Onshore wind has made a valuable contribution to the UK energy mix in recent years and we are confident that it will make its expected contribution to the UK’s carbon reduction and renewables targets. We will consider carefully the level of investment that developers are likely to bring forward under the proposals announced by my rt. hon. Friend the Secretary of State on 18 June.

The first payment for the main Capacity Market scheme will be made in 2018 – although payments under the transitional arrangements will commence in 2016. Updated Capacity Market budgets will be set for each capacity year following the outcome of the auctions for that year. Each auction will have a price cap to limit payments and protect consumers. The price cap for the first auction to be held in December 2014 is £75/kW.

The reasons for introducing competition for Contracts for Difference earlier than previously proposed are the potential to improve value for money (including by managing expenditure within the Levy Control Framework cap) and drive innovation; and because the strong development of the renewables pipeline has helped to create appropriate conditions for competition. In developing our proposals we have also been mindful of the final EU Guidelines on State aid for environmental protection and energy 2014-20 published on 9 April 2014.

We anticipate that some generators will seek to establish the terms of any PPA and financing arrangements before they participate in the CfD allocation round, in order to understand better their likely costs. Such conditional PPAs could take a number of forms, from indicative terms to a signed contract.

The Government is committed to a public consultation on the regulations on minimum standards of efficiency in the private rental sector. The Government expects to begin consultation shortly.

The Government will be in a position to bring forward secondary regulations on minimum standards of energy efficiency in the private rented sector once a consultation on the regulations has been published and responded to.

In order to make a fair comparison between the RO and CfD, my officials have looked at the differences in support costs between the two support mechanisms over the full support period (20 years for the RO, 15 years for CfDs) for solar and biomass CHP.

The Government also supports biomass conversions under both the RO and CfDs. Given that the Government support for biomass conversion ends on 1^st April 2027, support costs for biomass conversions have been modelled over 11 years (from 2016/17).

Table 1: Comparison of Total Discounted RO and CfD Support Costs

*Estimates based on new capacity commissioning in financial year 2016/17. Values are in £2012 real prices and discounted to the first year of generation (2016/17), using the Government's 3.5% discount rate.

It is not possible to directly compare renewables support costs (offered via the Renewables Obligation and Contracts for Difference), with support costs offered via the capacity market, as support under the Capacity Market is offered only for capacity and does not vary directly with the amount of generation produced by a plant.

Under the Capacity Market, all successful capacity will receive the clearing price of the auction in which they bid. The first capacity market delivery year is in 2018/19. Our latest estimate of the average clearing price over the first 15 years of the Capacity Market is £34/kW/year (in 2012 prices). For 1GW of de-rated capacity this corresponds to £500m over 15 years.

We anticipate that some generators will seek to establish the terms of any PPA and financing arrangements before they participate in the CfD allocation round, in order to understand better their likely costs. Agreements between generators and PPA providers could take a number of different forms, from indicative terms to a signed contract. The decision to sign a conditional PPA ahead of the auction, and the duration of any agreement, are ultimately commercial matters.

We anticipate that the Offtaker of Last Resort (OLR) will encourage competition in the PPA market both at the outset of the CfD and once any initial PPA has expired. Generators agreeing to a conditional PPA would be able to participate in the later short-term PPA market, once their initial PPA had expired; backed by the protections afforded by the OLR.

DECC has not undertaken any research into the accuracy of the assumptions made in the English Housing Survey that all stone properties built before 1920 are of solid wall construction.

I refer the hon. Member to the answer I gave him on 3 Apr 2014, Official Report, Column 802W.

DECC does not hold data on the materials that have been used to fill individual cavity walls.

The government's most recent assessment of the costs and benefits of energy efficiency measures are set out the Assessment of Impacts which was published 5 March 2014 alongside the Future of the Energy Company Obligation consultation, available here:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/286926/The_Future_of_the_Energy_Company_Obligation_Assessment_of_Impacts.pdf .

For the purpose of this assessment, we assumed that the average installation cost for all Hard to Treat Cavity Wall Insulation measures was £1,296. We assumed that the installation cost for Internal and External Solid Wall Insulation (SWI) varies by property size, ranging from around £4,000 to £8,000 for Internal SWI and around £8,000 to £14,000 for External SWI.

The English Housing Survey shows there were 4 million homes built in England before 1919 of non cavity wall construction. It is possible that a proportion of these could possess fillable cavities, although no estimate on how many is available.

The tool used to produce the above figure can be accessed from the following link:

https://www.gov.uk/government/publications/cambridge-housing-energy-tool-guidance-note

The impact of the Capacity Market on bills was estimated for the Electricity Market Reform Impact Assessment which can be found at:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/288463/final_delivery_plan_ia.pdf

The results represent the net impact of capacity payments (beginning in 2018/19) and wholesale price impacts relative to a no capacity market scenario and are presented below in £, % and £/MWh terms.

Estimated net impact of the capacity market on average annual electricity bills (£)

Estimated net impact of the capacity market on average annual electricity bills (%)

Estimated net impact of the capacity market on average annual electricity prices (£/MWh)

However, as set out in the EMR Impact Assessment, we believe that our current modelling may over-estimate the net bill impact of the Capacity Market. Additional investment in generating capacity, paid for through the Capacity Market, should reduce volatility in the wholesale electricity price, since it ensures we avoid scarcity situations where prices spike and costly blackouts occur. As there is limited evidence on the behaviour of wholesale prices under conditions of low capacity margins, there is considerable uncertainty about what the overall bill impact of the Capacity Market might be, especially when compared to a world without a Capacity Market to address security of supply issues.

The Department intends to publically consult on the regulations relating to Minimum Standards of Energy Efficiency in the Private Rental Sector (secondary regulations for section 43 of the Energy Act 2011) before summer 2014. How the regulations may apply to houses in multiple occupation is expected to form part of this consultation.

We do not consider that the method of allocating Contracts for Difference (CfDs) has a direct impact on the viability of the offtaker of last resort (OLR).

We have recently consulted on the OLR and are currently considering responses. Based on those responses, we will consider whether further modelling is necessary to ensure/verify that the OLR is viable as proposed.

The government's assessment of the number of households that could be supported by the proposed new ECO targets currently being consulted on is set out in the 5 March publication ‘The Future of the Energy Company Obligation: Assessment of Impacts', available here:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/286926/The_Future_of_the_Energy_Company_Obligation_Assessment_of_Impacts.pdf .

Evidence from the Inbuilt report on various types of Hard To Treat cavity walls informed the government's assumptions on the technical potential for these measures. Party wall cavities were not considered in the Inbuilt report, and the government did not estimate the uptake of this technology in the Assessment of Impacts.

At the UN Climate Action Summit in September the Prime Minister called on all countries to increase their Nationally Determined Contributions (NDCs). As part of our incoming COP Presidency, we are encouraging all countries to submit increased NDCs ahead of COP26 which represent their highest possible ambition. The UK will play its part and come forward with an enhanced NDC well ahead of COP26.