The Department of Energy and Climate Change (DECC) has published its five-year plan, which details its energy and environmental strategy for 2015 to 2020 and how it will spend its budget for the 2015/16 year.
One of the objectives set by DECC is to “secure ambitious international action on climate change and reduce carbon emissions costeffectively at home”. The report pointed to the untapped potential for energy efficiency measures in the business sector and the need to reduce the administrative burden of energy policy and tax while improving policy to encourage further energy efficiency. DECC confirmed that a government response to the Business Energy Tax Review is expected to be announced in the 2016 Budget. The aim of the consultation, issued last October, is to streamline carbon legislation and associated taxes, possibly through the introduction of a single reporting framework as well as a new energy consumption tax based on CCL.
DECC also intends to explore how further support can be given to small and medium enterprises (SMEs) and so build on its SME Guide to Energy Efficiency, published a year ago. In addition, investment of £295m will be made in public sector energy efficiency over the five-year period.
The report highlighted the importance of an effective carbon price and DECC’s intention to work to strengthen the EU Emissions Trading Scheme (EU ETS), which has experienced low prices due to oversupply of allowances and falling commodity prices. Notably, the report did not mention the Carbon Price Floor, which has been the subject of much recent debate. The Carbon Floor Price is designed as a top-up to the price of EU Allowances but is only applied in the UK. Industry argues that it has the effect of exporting emissions to other countries where the cost of carbon is lower. Industry groups are lobbying for the tax to be either abolished or frozen in the next budget, whereas some energy suppliers point to the Carbon Price Floor as being an efficient mechanism for encouraging a switch from coal to gas. DECC has reiterated its intention to support the move away from coal-fired power generation and towards gas; a consultation will be held in the spring on proposals to close all unabated coal-fired plant by 2025.
Carbon Capture and Storage (CCS), which will be essential if gas-fired generation is to increase, was mentioned in DECCs plan, “we will consider the advice from Lord Oxburgh’s CCS Advisory Group as we explore our future approach to this technology for both power and industrial processes.”
The main objective outlined in DECC’s corporate report was to “ensure the UK has a secure and resilient energy system”. Focus will be given to the expansion of new nuclear and investment in nuclear research and development, with a particular focus on small modular reactors for which a policy position is currently under development. Plans are underway for a competition to find the best design for this small-scale nuclear technology.
Other policies designed to meet energy security are the safe development of shale gas to supplement the supply of North Sea gas, the use of demand side response, and consideration is also being given to smart technologies such as energy storage. DECC sees offshore wind as making an important contribution to the energy mix if it can become cost competitive.
DECC’s full department plan can be found Single Departmental Plan.