U.K. to Boost Low-Pollution Energy as It Moves to Cap Bills

Written by Jess Shankleman and Alex Morales. This article first appeared in Bloomberg News.

The U.K. government is moving to boost energy supplies while ratcheting back pollution and limiting upward pressure on customer bills.

The measures will benefit developers of offshore wind farms led by Dong Energy A/S and companies like Tesla Inc., which is seeking to spread cutting-edge technologies from electric cars to home battery systems. It’s also aimed at capping the charges that the Big Six utilities including Centrica Plc can charge on some consumers.

The government is concerned electricity and gas consumers are being overcharged by 1.4 billion pounds ($1.9 billion) a year by remaining loyal to their utilities. It’s moving to protect households and also setting out longer-term plans to spur investment needed to replace aging power plants.

“Our broken energy market has to change,” Prime Minister Theresa May said in a statement released before details of the plan are due on Thursday. “It has to offer fairer prices for millions of loyal customers who have been paying hundreds of pounds too much.”

Britain’s effort is in line with goals set out by the European Union and almost 200 countries signed up to the Paris Agreement on limiting fossil-fuel emissions causing global warming. It contrasts the measures President Donald Trump’s administration took this week to dismantle regulations in the U.S. meant to restrain coal and other polluting fuels. For Prime Minister Theresa May’s government, boosting clean-energy is necessary to replace aging power plants due to finish their lives in service.

The Department for Business, Energy and Industrial Strategy released details of its program in two separate statements. First, it is outlining a program for the energy regulator, Ofgem, to introduce the cap for about 18 million households on the Standard Variable Tariffs, the default rate consumers revert to once fixed-term contracts expire. Second, it is issuing a clean power plan, noting that low-pollution industries are set to grow 11 percent a year through 2030, four times faster than the rest of the economy.

“While 5 million households will see their bills capped form this winter, I want to see every household protected from rip-off bills,” Business Secretary Greg Clark said in a statement on Thursday.

Government Goals

The government has already committed to slashing greenhouse gases by 80 percent by 2050, compared to 1990 levels. Following are some of the winners and loser from the government’s work:

  • The Big Six utilities — Centrica Plc, SSE Plc, Innogy SE, EON SE,Iberdrola SA and Electricite de France — have the most to lose with the government seeking to impose a price cap on bills they charge to some customers. Parliament will scrutinize draft legislation set out by the government, and May is hoping for a cross-party consensus on how to act.
  • Carbon capture and sequestration technologies are seen as vital to reducing emissions as they allow pollution power plants and factories to scrub emissions from their chimneys and bury them deep underground. Yet CCS is still too expensive and complex to be rolled out on a commercial scale globally.
  • Carbon capture and storage technology may get a boost. It has been stuck without funding since the Treasury scrapped a 1 billion-pound ($1.3 billion funding competition in 2015. Claire Perry, the government’s climate minister, said last week CCS systems are “vital” to tackling the issue.
  • Offshore wind developers such as Dong will be at the forefront of a government auction for power-purchase contracts aimed at stimulating emerging renewables technologies. The government on Wednesday set aside 557 million pounds for the contests, which will happen in 2019.
  • Nuclear power will get support. After approving the first new atomic plant in more than a generation, the government wants more plants to flourish and replace the ones that are aging out of the system and is seeking to build one of the world’s first small modular reactors in the 2020s. Electricite de France SA is working on the Hinkley Point plant in western England, and the government wants more nuclear to ensure steady supplies of electricity in the decades ahead.
  • Tidal power research projects, like the one in Swansea Bay, may have more certainty about their future. The government is working on a response to an independent review that suggested projects like the one sponsored by Tidal Lagoon Plc would create jobs and ensure power supplies. Perry said last week promoters would have to “be patient” for news on the projects, suggesting a decision may not be in Thursday’s plan.
  • Heat and efficiency projects are likely to benefit. The government wants to stimulate use of electric cars and encourage owners of drafty buildings to invest in insulation.
  • Clean transport developers such as electric car makers and those promoting hydrogen as a road fuel, like Royal Dutch Shell Plc, may also find incentives in the government’s program. After tilting the market toward diesel, the government now is anxious to reduce particulate pollution that caused health problems.

Green groups such as WWF already expect the long-overdue plan to fall short of what is needed to put Britain on track to meet its greenhouse gas targets. Without new policies, the U.K. will spew about 30 percent more carbon dioxide than it has budgeted, the group says.

ClientEarth, a group of environmental lawyers, is consider taking the government to court if the latest plan fails to put the U.K. on track to meet its targets.

“The government needs to produce policies of real substance,’’ said Jonathan Church, a lawyer at ClientEarth.

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