The government has published details of its long-awaited Energy Bill, designed to keep lights on and emissions down. It is clear from the announcement that the Lib Dems have lost the battle over the clean energy target.
The government will provide £7.6bn towards low-carbon electricity infrastructure by 2020, but household bills are set to rise to pay for it.
A decision about setting carbon emission targets for 2030 has been delayed until 2016, after the election.
Labour said this was a “humiliating failure” by the Lib Dems, who want gas banished from the electricity system.
Environmentalists also condemned the bill, saying it would make it very hard to meet the UK’s law on climate change.
Details of the bill were announced late on Thursday although the bill itself will not be published until next week.
Crudely speaking, the bill has been a battleground between Chancellor George Osborne, who favours gas-powered generation, and the Liberal Democrats, who want clean energy.
The chancellor is adamant that gas will help keep down power bills in the future. He and the Treasury want flexibility in energy choices.
But the Lib Dems want to banish gas from the electricity system almost entirely by 2030 to reduce CO2 emissions in line with the Climate Change Act, although gas will be needed as a back-up.
They say this will also keep power bills down overall by reducing the UK’s exposure to volatile gas prices in a power-hungry world.
Lost the battle
On-going uncertainty over energy strategy has infuriated the firms that are expected to invest more than £100bn to renew the UK’s decaying energy infrastructure by 2020.
It is clear from the announcement that the Lib Dems have lost the battle over the clean energy target. In a compromise, the principle of the target will be attached to the bill, but details will not be decided until 2016.
The delay will not just make it hard for the UK to meet its long-term emissions targets under the Climate Change Act, it will also infuriate firms wanting to build factories manufacturing offshore wind turbines in the UK, because they want long-term certainty that there will be a market for their goods.
This decision runs counter to the resolution at the Lib Dem party conference.
As part of the negotiations, the chancellor has agreed to fund clean energy until 2020, almost matching the amount the advisory committee on climate change said would be needed to meet emissions targets (£8bn in 2020).
DECC estimate that that amount would add another £95 – or 7% – to the average household energy bill by 2020 – although some analysts think it would be more.
Indeed, the committee itself estimated the increase at about £110.
DECC believes the clean energy measures will save on bills in the long run.
“This is a durable agreement across the coalition against which companies can invest and support jobs and our economic recovery,” said Energy and Climate Change Secretary Ed Davey.
“The decisions we’ve reached are true to the Coalition Agreement. They mean we can introduce the Energy Bill next week and have essential electricity market reforms up and running by 2014 as planned.”
But Labour criticised the government’s failure to set an emissions target for electricity for 2030.
“It is outrageous that on the day Ed Miliband committed to a tough cut in Britain’s carbon levels by 2030, George Osborne and Ed Davey abandoned their target,” said Caroline Flint, shadow energy and climate change secretary.
“This is a humiliating failure by the Liberal Democrats and a betrayal of David Cameron’s promise to be the greenest government ever.”
On Thursday, Labour leader Ed Miliband visited Whitelee wind farm outside Glasgow, which is Europe’s largest onshore windfarm.
He endorsed the advised target of 50g CO2 per KiloWatt hour for 2030 and said that mixed messages from the coalition government were endangering the future of the renewable energy industry.
Environmental groups have also criticised the government’s announcement.
“By failing to agree to any carbon target for the power sector until after the next election, David Cameron has allowed a militant tendency within his own ranks to derail the Energy Bill,” said John Sauven, executive director of Greenpeace.
“It’s a blatant assault on the greening of the UK economy that leaves consumers vulnerable to rising gas prices, and sends billions of pounds of clean-tech investment to our economic rivals.”
But Energy UK, which represents the energy industry, welcomed the measures.