The government published its delayed Energy White Paper on 23 May 2007.

There are few surprises in the White Paper, which sets out the government’s strategy for meeting the dual challenges of climate change and energy security over the next two decades and beyond.

The popular press has concentrated on the nuclear question, but in reality there is little new on nuclear.

The government focuses on achieving emissions reductions and energy security through a strengthening of the energy market and support for measures that incentivise (within the market) diversity of supply and low carbon energy sources. The framework for the future set out in the White Paper suggests a wide role and increasing opportunities for the private sector.

The need to meet EU targets means that the White Paper cannot be seen as a definitive statement of government energy policy. The government acknowledges that, after decisions are reached as to each Member State’s contribution to the EU wide emissions reductions and renewable energy targets, it is likely that the UK will need to take measures beyond those set out in the Paper.

The highlights are summarised below. As with many White Papers, few of the chapters contain anything more than a broad statement of policy.

Chapter 1 - Energy and climate security: a global challenge

The government acknowledges that the problem of climate change can only be tackled globally. It explains its commitment to work with the EU, G8 and other global partners to promote a transparent, secure and low carbon energy market. The government is particularly concerned that the EU’s Emission Trading Scheme should be extended and strengthened. It also wishes to see carbon capture and other carbon efficient fossil fuel technology developed in conjunction with emerging economies such as China, which are heavily fossil fuel dependent.

Chapter 2 - Saving energy

The White Paper sets out a commitment to promoting greater energy efficiency, both at home and in the workplace, through a variety of measures including:

(a) the introduction of the Carbon Reduction Commitment;

(b) the replacement of the Energy Efficiency Commitment with the more extensive Carbon Emission Reduction Target from 2008; and

(c) schemes to roll out smart meters showing real time consumption to businesses and domestic consumers.

The government has also committed the public sector to a significant reduction in carbon emission over the next two decades.

The commitment to promoting domestic energy efficiency goes hand in hand with a continuing commitment to address the issue of fuel poverty.

Chapter 3 - Heat and distributed generation

The White Paper sets out a continuing commitment to encouraging heat and distributed generation, although the government stresses that it is for the market to decide on the best mix of technologies. The White Paper does not announce any new heat or distributed generation incentives. Existing incentives will remain in place, and the government asserts its commitment to ensuring that distributed energy schemes have a real opportunity to compete in the market.

Chapter 4 - Oil, gas and coal

The White Paper acknowledges that the UK will remain reliant on fossil fuels for many years and that reliance on imports will increase.

The government will seek to address the associated security of supply issues through a range of measures, including:

  • encouraging energy efficiency;
  • the development of alternative energy sources (renewables and nuclear);
  • working with the industry to maximise economic recovery of the UK's oil and gas reserves, including assessment of the potential for establishing infrastructure west of Shetland;
  • ensuring effective energy markets in the UK and abroad; and
  • improving emergency planning arrangements.

Chapter 5 - Electricity generation

Chapter 5 of the White Paper sets out government strategy for electricity generation over the next two decades. The challenge of balancing carbon emissions with the pressures of security of electricity supply is one of the critical issues facing the government, and this chapter will be the focus of the energy industry’s attention.

Investment framework

Over the next two decades, the UK will need substantial investment in new electricity generation capacity to replace a number of closing coal, oil and nuclear power stations and to meet expected increases in electricity demand. The government suggests that around 20-25GW of new power stations will be needed by 2020, with a further 10GW requirement by 2030. It expects such investment to come from the market, and is concerned that the market framework should be such as to encourage sufficient investment, at the right time, and as much as possible in low carbon forms of generation. To facilitate sufficient and timely investment, the government recognises the need to ensure that its policy and regulatory framework provide investors with certainty and incentives.

Policy proposals, aimed primarily at reducing key policy and regulatory uncertainties, include:

  • strengthening the EU Emissions Trading Scheme and the carbon market;
  • providing high-quality forward-looking information (a new market information service will be launched in autumn 2007);
  • improvements to the planning regime for energy generation; and
  • reducing uncertainty by clarifying policy on renewables, carbon capture and storage, and nuclear power.

The government is also currently reviewing the electricity priority user arrangements and will launch a consultation on these in summer 2007.

Networks

The government recognises that investment in generation must be accompanied by investment in transmission and distribution networks. Ofgem will continue to work with the industry to facilitate this through the price control process, and to increase flexibility and accessibility to the networks.

Renewables

See separate briefing note, “Energy White Paper: Banding Proposals”.

Cleaner coal and carbon capture and storage of fossil fuels There are three principal methods for reducing carbon emissions from fossil fuel fired power generation:

  • improving coal-fired power station efficiency;
  • co-firing coal with biomass; and
  • carbon capture and storage (CCS).

The government will continue to encourage development of all three methods. Notably, it is launching a competition for demonstration of CCS on power generation, to enable the technology to be proven and gain a better understanding of costs.

Nuclear power

The government’s preliminary view is that it is in the public interest to give the private sector the option to invest in new nuclear power stations. A consultation document on this issue was published alongside the White Paper.

The government sees the development of new nuclear power stations as an important part of its strategy to tackle the challenges of climate change and security of energy supply.

Chapter 6 - Research and development, demonstration and deployment, and skills

The White Paper details how the government will continue, and increase, its support for the development of low carbon energy technologies.

In summer 2007 it will launch the new Energy Technologies Institute, with a minimum budget of around £600 million over the next decade for research and development into low carbon energy, drawing on private as well as public funding.

Support will continue for the Energy Research Partnership, established in January 2006 to bring together key organisations across government, the research community and business, and for other initiatives including the Marine Renewables Deployment Fund. The Carbon Trust, an independent government funded company, will also continue to support various low carbon technology development projects.

Chapter 7 - Transport

Transport accounts for around a quarter of UK domestic energy use and emissions of carbon. The government proposes a variety of measures to reduce UK transport emissions, including:

  • carbon pricing of transport through taxation, trading and regulation;
  • requirements for new car fuel efficiency (the current EU Voluntary Agreements on new car fuel efficiency expire in 2008/9);
  • continuing support for the European Commission’s recent proposal to include aviation in the EU Emissions Trading Scheme;
  • continuing encouragement of the EU to consider the inclusion of surface transport in the EU Emissions Trading Scheme; and
  • the Renewable Transport Fuel Obligation, announced in November 2005, which will require transport fuel suppliers to ensure five per cent of total fuel sales are from renewable sources by 2010.

The Low Carbon Transport Innovation Strategy (which was published alongside the White Paper) sets out a wide range of actions the government is taking to encourage innovation and development in low carbon transport technologies.

The White Paper acknowledges that encouraging behaviour change is also a key factor in reducing transport emissions. The government is committed to promoting public transport and educating the public to make smarter transport decisions.

Chapter 8 - Planning

The delivery of the necessary energy infrastructure is a key concern and is central to proposed changes to the planning system. The government intends to establish a new development consent regime for nationally significant energy infrastructure, which will streamline the planning process, reducing costs, delays and uncertainties.

More detail on these proposals is contained in the Planning White Paper 2007, Planning for a Sustainable Future