Centrica is to create 4,000 jobs in Britain with the development of a huge North Sea gasfield after the Government signalled a new “dash for gas”. After weeks of delay, heated negotiations and only hours after a £500 million tax break for this type of field was unveiled, the owner of British Gas said that it would invest £1.4 billion with its French partner GDF Suez.
Ed Davey, the Energy and Climate Change Secretary, said yesterday that gas would be at the heart of Britain’s energy strategy and promised that new gas-fired power plants would play a “key role” in keeping the lights on. He also said that consumer-funded subsidies for onshore wind farms would not be cut by as much as expected.
The moves comed after intervention from the Treasury, which wants more gas-fired power plants and fewer wind farms to be built to limit rises in energy bills. The Chancellor has been arguing with his Liberal Democrat counterpart Mr Davey over the level of subsidies for onshore wind farms.
The Treasury had been pushing for subsidy cuts of up to 25 per cent, while Mr Davey had insisted on a more modest reduction of 10 per cent. The row had resulted in a decision for all new renewable subsidies, also announced yesterday, being delayed for weeks.
Friends of the Earth hailed the smaller cut for onshore wind subsidies as a victory for Mr Davey but said that “Treasury arm-twisting” had forced him to back “polluting” gas plants in return.
However, the Government’s independent adviser on climate change also warned that triggering a second so-called dash for gas was against the law, as it would make it impossible for the UK to meet its legally binding target to slash carbon emissions. David Kennedy, chief executive of the Committee on Climate Change, also criticised ministers for sending out “mixed messages” that would damage Britain’s ability to attract the estimated £110 billion of investment required in new energy apparatus over the next decade.
“They’re saying ‘we will decarbonise the power sector and at the same time have a gas-based system’. You can’t have it both ways. The uncertainty is bad for the investment climate.”
The draft Energy Bill, overseen by Mr Davey, contains a proposal to set a legally binding target to switch to almost entirely “low-carbon” forms of power generation, such as wind farms and renewables by 2030, which is opposed by George Osborne. Mr Davey said that negotiations with the Treasury on the proposal would continue in the autumn. He insisted that the target had not been abandoned as part of a deal to secure a more modest cut for onshore wind farm subsidies.
Asked about the reported rift with the Treasury, Mr Davey claimed “we are working well together” and insisted he was responsible for the Government’s energy policy. He added: “There is a false debate between gas and renewables here, which is complete nonsense.”
Centrica said the tax breaks had removed a “major obstacle” to the development of its Cygnus gasfield, which it claims is the biggest gas discovery in the southern North Sea for 25 years. At peak production, the field will supply about 5 per cent of Britain’s energy, enough to meet the demand of nearly 1.5 million homes.
As well as creating about 4,000 jobs, Centrica also expects to pay £1 billion in tax as a result of the development.