The Energy and Climate Change Committee has recommended that the UK Government goes ahead with an Emissions Performance Standard (EPS) for fossil fuel fired power stations to limit emissions from power stations, saying this is necessary to meet the UK’s carbon budgets and develop new technology. However the EPS is likely to increase energy prices.
The Committee warns that existing policies will not deliver adequate investment in new low-carbon electricity generating capacity for the 2020s -2030s – and risks locking the country into a costly high-carbon energy system.
Emissions Performance Standards could provide certainty to investors that there will be a future market for low carbon electricity, helping to lower the cost of capital investment in green technology – and stimulating the development of carbon capture and storage (CCS) systems, according to the committee.
The report raises concerns, however, that a poorly designed EPS could have a range of unintended consequences. A badly structured EPS – including gas power stations too early on, for instance - could undermine investment in new capacity needed between now and 2020, potentially leading to a generation gap.
Alternatively, if emissions limits were too lax the EPS could spark a new ‘dash for gas’, encouraging large scale deployment of unabated gas power stations with long term negative consequences – reducing energy security and making our climate change targets higher to meet.
The MPs conclude that the policy framework as it currently stands is grossly inadequate and will not deliver adequate investment in new low-carbon generating capacity for the 2020s and 2030s.
Reforms to the electricity market are urgently required in order to ensure sufficient investment is made now to deliver infrastructure for the 2020s.
EPS is difficult
Commenting on the report, David Porter CEO of the Association of Electricity Producers says: “An EPS for fossil fuel fired power stations is not a straightforward proposal and may be in breach of EU law. It is essential that it is not applied to existing installations.”
He adds: “Fossil-fuelled power stations already have a cap on CO2 emissions to meet European Union reductions under the EU Emissions Trading Scheme, so an EPS amounts to a 'double regulation' for one problem - not helpful where investors' confidence is concerned. It may also affect investment in gas-fired power stations which, in the future, are expected to act as ‘back-up’ plant for intermittent renewables such as wind.
“An inappropriate EPS may deter, rather than encourage, investment in low carbon generation, which is critical to meeting the £200 billion of investment needed across the energy sector. It is likely to add to customers' bills and may have the unintended consequence of closing fossil fuel power stations too early.
“Electricity producers are working hard towards a low carbon future, and it’s important this work isn’t delayed by political uncertainty. The Government should focus on ensuring the UK is attractive to investors through other measures in its Electricity Market Reform work.”