Energy Bill: Will companies now build new power plants?

Some suppliers have given a cautious welcome to the Bill, while others are more sceptical

The UK's big energy suppliers are trying to digest the impenetrable jargon that cloaks the government's announcement about the contents of its forthcoming Energy Bill.

For several years, they have been busily lobbying the government and the energy regulator Ofgem for some sort of plan.

They want to know what, exactly, the government proposes to do to make it profitable to start building new sources of electricity, such as nuclear power stations and wind turbines.

There will be several big ideas in the Bill to achieve that.

One, labouring under the term of "contracts for difference", is a mechanism under which the government will guarantee a price that energy firms can obtain for producing and selling electricity generated either by wind farms or new nuclear power stations.

A second idea, under the heading of the term "capacity market", is a mechanism for compensating companies if they have to build gas-powered electricity generators - which can be switched on and off quickly - which may only be needed to make up a shortfall in generating capacity when there is not enough wind to power the wind turbines.

Superficially, the suppliers are welcoming the ministerial announcement as a big step forward.

But ask obvious questions, such as: "How, exactly, will the Energy Bill affect your intentions to build more power plants in the UK?" or "what will your company do now, that it might not have done before?" and the off-the-record response from some of the firms is much more reserved.

One said: "This statement tries to give the impression there is a way forward. What will we do now? It is not possible to say. We need to see the details of the Bill."

"The details are not yet there" said another.

Another added: "There is some comfort that the process is moving in the right direction, but nothing has changed overnight."

'Much needed projects'

The most enthusiastic response has come from EDF Energy, which runs eight nuclear power plants in the UK and wants to build two new ones in Somerset.

Vincent de Rivaz, chief executive of EDF Energy, said: "We recognise the government's continued commitment to deliver the timetable for electricity market reform, including legally robust arrangements for much-needed projects during the transition."

"This is good news and a significant step toward providing secure low carbon energy for the UK for many years to come."

In a BBC interview, strategy director Paul Spence pointed out that the company still had to finalise details with the government, including a guaranteed minimum price for nuclear power generated.

Over at E.On, chief executive Tony Cocker, said: "We've consistently argued that the Energy Bill needs to meet two key considerations - giving customers value from this change and providing a robust basis for the tens of billions of pounds of investment that the UK needs."

"We are pleased that the government has set out a clear position on key issues and it looks as though the Bill is a good move in the right direction."

When asked what the practical impact of the bill might be, a company spokesman said: "I think those questions will be better answered once we've seen the detail of the full Bill."

'Vacuum of uncertainty'

Over at Npower, owned by the German RWE group, the boss Volker Beckers struck a less enthusiastic tone, describing the government announcement as only "pragmatic".

"RWE and Npower still reject the need for a capacity mechanism to enable investment in fossil-fuelled generation."

"Today's announcement is a small step forward, but we need to see further efforts on clarity and stability."

That thought was echoed by SSE, another of the UK's big energy suppliers.

"It is clear that when the Bill finally arrives, there will still be a lot of detail to be worked through before the full implications can be understood," said a company spokesman.

"We urge the government to move quickly to firm up these commitments and fill the vacuum of uncertainty, so that investors like SSE can make the firm investment decisions."