Government must resist new 'dash for gas', advisers say

Plans for a new generation of nuclear power stations in the UK have slipped

The government needs to multiply investment in clean energy four-fold to avoid breaking laws on renewables and climate change, official advisers say.

This would raise the annual energy bill of a "typical household" by £100 by 2020, says the Committee on Climate Change (CCC).

But it says that is a cheaper option than a new "dash for gas".

It says the potential advent of a shale gas boom in Europe is not a "game-changer" for energy policy in the UK.

The committee's annual report to Parliament confirms that greenhouse gases fell in the UK by 7% in 2011, but says most of this was down to the warm winter, rising fuel costs and falling incomes.

Only 0.8% of the CO2 cut was due to policies from government.

"We have to move from good intentions and we need to do it very quickly," said David Kennedy, chief executive of the CCC.

Mixed results

The report says investment in wind power has been running at a third of the annual amount that will be needed by the end of the decade.

Plans for new nuclear power, and carbon capture and storage projects have also both slipped.

There has been an improvement in insulating roofs and cavity walls but little progress on solid walls and low carbon heating. Emissions from new cars have continued to fall but there has been scant progress with vans.

The report examines the notion of a second dash for gas by some who are optimistic that Europe will benefit from the same sort of cheap shale gas boom as that experienced in the USA.

The first dash for gas in the 1990s reduced the UK's emissions as power generation switched from dirtier coal.

But the committee draws on International Energy Agency (IEA) forecasts to project that gas costs up to 2020 will remain around 80p per therm, which will make it unaffordable for electricity when the price for carbon is added.

It says the government is giving mixed messages on gas, and should explicitly rule out a new dash for gas.

However, its projections are challenged by some who believe the global glut of gas will eventually lead to much lower prices if the historic link between oil and gas prices is broken.

'Carbon-constrained world'

Nick Grealy, who runs the pro-shale gas website No Hot Air, told BBC News: "The 80p figure is ludicrous. It may well happen in a tight market until 2015 but after that the deluge."

The CCC says it has modelled a future with gas at 40p per therm which still shows gas confers no advantage over nuclear power.

That is because the government's controversial carbon floor price will increase from £30 per CO2 tonne in 2020 to £70 in 2030, forcing up the cost of generating with fossil fuels.

Climate change sceptics have been campaigning to have the targets under <link> <caption>the Climate Change Act</caption> <url href="http://www.decc.gov.uk/en/content/cms/legislation/cc_act_08/cc_act_08.aspx" platform="highweb"/> </link> scrapped, but Ed Davey, the Energy Secretary, recently said the Act would stay.

Mr Kennedy said: "There's nothing we have seen that tells us we are not going to live in a carbon-constrained world."

Asked if the government should have a Plan B in case it fails to deliver a new fleet of nuclear power stations, he added: "Nuclear has a major role. It's much harder to decarbonise the power sector if we don't get nuclear."

If financing could be agreed for a new nuclear station for EDF at Hinkley Point, in Somerset, others would follow, he said.

But he did urge the government to announce swiftly the new level of wind energy subsidies and the Treasury's future cap on the clean energy levy on people's bills.

Some £8bn a year is needed in clean energy development by 2020, he said, so the chancellor should set his cap on bills at this level, costing £100 extra per home for in gas and electricity bills.

Wind subsidies

With fuel poverty on the rise some MPs want a tight cap to keep bills down.

But Mr Kennedy said: "There must not be an arbitrary Treasury cap. It must be based on technical studies that show how the carbon cuts under the Climate Change Act can be met."

The committee said <link> <caption>the government's forthcoming Energy Bill</caption> <url href="http://www.decc.gov.uk/en/content/cms/legislation/energybill2012/energybill2012.aspx" platform="highweb"/> </link> should include a clear target of 50g of CO2 per kWh of electricity produced by 2030 - compared with some 400g now - in order to keep on track with the agreed 80% CO2 cut by 2050.

Current proposals have no clear over-arching objective, it said, warning this would deter investors.

The review of wind subsidies is due shortly, with the chancellor under pressure from many backbenchers to cut the subsidy by more than the 10% proposed by the Department for Energy and Climate Change - a cut which many experts say would increase the price of energy.

Keith Allott, head of climate change at WWF UK, said: "For the fourth year running, the Committee on Climate Change has made clear that a dramatic step change in ambition is needed.

"Too many key policies - such as the Green Deal, the Green Investment Bank and now the Energy Bill - are hobbled by lack of ambition and poor implementation."

He added that the government risked letting the Climate Change Act "wither by neglect".