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UK Government Deadlocked Over Green Energy Bill

Jonathan Ford and Pilita Clark, Financial Times

Coalition ministers are locked in a stand-off over sweeping electricity market reforms in a bill the energy secretary, Ed Davey, is due to present to parliament before the end of the month. 

The bill, which has taken almost two years to prepare, sets out a new system of financial incentives to spur billions of pounds of investment in low-carbon power generators such as nuclear plants and wind farms.

But officials in Mr Davey’s Department of Energy and Climate Change are still negotiating with the Treasury about how large the incentives should be.

Energy department officials and investors are worried that the bill could be undermined if the Treasury puts tight limits on the financial support available.

Mr Davey, a Liberal Democrat, wants to reinforce the bill’s incentives with a target to decarbonise the electricity sector by 2030.

But George Osborne, the chancellor, believes that such targets are costly to meet and wants to see significant amounts of potentially cheaper gas power used until at least 2030, a move that the government’s climate advisers say risks breaching the UK’s carbon reduction commitments.

A Treasury insider said there might not be a deal before the energy bill was presented to parliament. “I am not excluding it but we may not have an agreement,” they said.

The dispute comes on the heels of a series of clashes between Conservative ministers and their Lib Dem coalition partners over the government’s backing for renewable energy.

Mr Davey slapped down John Hayes, his Conservative junior energy minister, two weeks ago for suggesting that the government should withdraw support for onshore wind farms.

The divisions have prompted a group of prominent chief executives to write to David Cameron, prime minister, to express their concern about the “divergence of views at the heart of government” on national energy policy.

“This uncertainty is paralysing investment and undermining the UK’s growth prospects,” said executives including Vincent de Rivaz, head of the UK arm of EDF, the French utility. It is due to decide this year if it will build two nuclear reactors in the UK.

The heads of Heathrow airport and the consumer goods giant Unilever have also signed the letter, which supports the 2030 decarbonisation target.

Energy department officials have told several companies to expect the bill in the week starting November 19, though publicly the department has promised to introduce it by the end of the month.

The Treasury has a say in the size of the incentives available to support renewable and nuclear power plants because of a spending cap known as the “levy control framework”.

Introduced in 2010, this limits the amount of money the energy department can allow to be raised from consumers to pay for green electricity through extra charges on utility bills.

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