British companies have warned the Government that electricity market reforms could force businesses to leave the UK.
The Energy White Paper is designed to attract the £110bn of investment that Energy Secretary Chris Huhne says is needed to replace ageing power stations.
But British businesses are complaining that new rules will cause energy bills to escalate.
John Cridland, director-general of the CBI, said: “Some energy-intensive industries are already on a knife edge, and without help to shield them from new measures like the carbon floor price, they could struggle to stay in the UK.”
Energy companies welcomed the introduction of feed-in tariffs, which ensure generators of low-carbon electricity receive an agreed price. These have been tweaked so generators pay money back to the Government if wholesale electricity prices exceed the agreed price.
Neil Cornelius, director at Deloitte, said the new measures should provide sufficient guarantees for utilities to go ahead with their plans for new nuclear power stations.
The White Paper also introduced a standard limiting emissions from new power stations, to prevent companies building new coal-fired power stations without clean coal technology. Crucially, this was set high enough that companies can build new gas-fired power stations.
Mr Huhne said: “We do not want new coal plants; we do want new gas plants. We believe gas will have a continued role in the security of supply and a longer-term role in balancing the system.” The emissions standard will be reviewed in 2015, but Mr Huhne stressed that if a power station is built by 2015 it will be governed by the current standard.
Investors were hoping for a decision on a system to encourage traditional energy suppliers to provide back-up power for renewable energy. But Mr Huhne only launched a consultation on this so-called “capacity mechanism”, and said he would report back at the end of the year.
Mr Cridland lamented the delay and lack of detail in the White Paper. “More detail is needed on tariffs, and the case must be made for a capacity mechanism,” he said. “We need a clear decision on both by the end of the year to avoid damaging investor confidence.”
The proposals will be put to Parliament in May 2012. Mr Huhne said he expects them to come into force during 2013.