Utility Week

Utility Week 11th October 2013

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Policy & Regulation This week Giving suppliers more time to hit their targets could dramatically reduce the bill to consumers Giving Eco more time 'could slash costs' An 18-month extension to the Energy Company Obligation (Eco) could reduce annual costs to the industry and consumers by 40 per cent, according to analysis seen by Utility Week. The cost of the programme could fall to £800 million a year Government's Eco schedule is too tight with an 18-month extension, compared with the government's estimated £1.3 billion a year if the programme ended as scheduled in March 2015. Using the estimate of £2.4 billion a year produced by consultancy Nera in a report commissioned by Energy UK, the cost would fall to £1.4 billion a year. This could result in an estimated reduction of £21 to £38 in the average energy consumer's annual bill. The Department of Energy and Climate Change (Decc) said this week it would consult on the future of Eco early next year, although it has no current plans to extend it. Angela Knight, chief executive of Energy UK, told Utility Week: "If there are ways in which one is able to address Eco over a period of time that still gets the work done but prevents some of the cost ramping taking place, I certainly think that would be beneficial as far as the bill is concerned, and it does not walk away from the commitment to improve our housing stock." Reg Platt, senior research fellow at think-tank IPPR, said extending Eco "is potentially the easiest response" by the government to Labour's promised price freeze. He warned that it would be a relatively difficult process, adding: "It's not just flicking a policy switch." He said legislation would have to be changed, while suppliers who had made good progress under Eco would be in "uproar". Emissions 'Scrap carbon floor price', says business Heavy industrial customers have stepped up calls on the Treasury to scrap the UK carbon floor price in light of delays to compensation for the sector. Proposals to shield energyintensive industries from the cost of the surcharge on the European carbon price have been snarled up in the state aid process. Ministers originally expected approval from the European Commission by summer 2013. It is now considered unlikely to go through before the end of the year. Tata Steel and chemical giant BASF said the hold-up was harming UK manufacturers' competitiveness. At last week's Conservative party conference, energy minister Michael Fallon sympathised with industry's concern about rising costs and indicated a desire to cut back on green levies. The party is also under pressure to find ways to help consumers with the cost of living, after Labour threw down the gauntlet with a pledge to freeze energy prices for 20 months. The carbon floor price will add £5 to bills this year, rising to an estimated £26 in 2015/16. The carbon floor price is seen as the most plausible green levy to cut. Its status as a tax means it would be easier to reverse than renewable subsidy contracts or statutory energy efficiency schemes. One source close to Conservative backbenchers said there were rising hopes chancellor George Osborne could use his Autumn Statement to announce a U-turn. "The chances are still slim but I would have said it was impossible before. It would be a piece of meat for the Tory faithful," the source said. However, if the Treasury were to scrap the measure, it would lose predicted revenues of £975 million, rising to £2,200 million in five years' time. Electricity Solar can reach 20GW in next decade Solar generation can reach 20GW within a decade, according to climate change minister Greg Barker. Speaking at the launch of the Solar PV Energy Roadmap, Barker said 20GW of capacity was "potentially achievable" but only if "we can continue to drive down costs". Decc's central forecast estimated that the UK was likely to reach 10GW of solar PV by 2020, up from the 2.5GW currently installed. Barker added that hitting 20GW "will require greater innovation; it will require greater price reduction right through the supply chain". Political Agenda Mathew Beech It was political reshuffle week, and the energy teams – both within government and on the opposition benches – came through largely unaltered. Rumours that shadow energy secretary Caroline Flint was heading for a promotion proved groundless. It comes as no surprise on the back of Ed Miliband's Brighton price promise that he decided to stick with her. As one Labour figure said: "Caroline has become the face of the freeze, so Ed was not "Caroline Flint has become the face of the freeze" going to move her." However, shadow climate change minister Luciana Berger has been promoted to shadow public health minister and has been replaced by Jonathan Reynolds. Within Decc, the status quo has been maintained in what climate change minister Greg Barker called a "show of faith" by the prime minister in the current ministerial team and a desire for stability. Ed Davey will continue to lead the UK into a new nuclear renaissance – fresh from gaining support from Lib Dem members. Energy minister Michael Fallon will continue dividing his time between Decc and BIS, while Barker remains in post. He must be hoping for the Green Deal to show signs of life. The only key change was water minister Richard Benyon stepping down and making his way to the backbenches. In comes George Eustice, who is a member of the Efra committee and part of David Cameron's energy and climate change advisory team within Number 10. It will be up to Eustice to steer the Water Bill through the Commons. UTILITY WEEK | 11th - 17th October 2013 | 13

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