Given the Liberal Democrats opposition to new nuclear in the run up to the election, confirmation last night of a formal coalition with the Conservatives brought with it uncertainty. Whilst the compromise deal leaves the Liberal Democrats free to speak out against the formal designation of the Nuclear National Policy Statement and to abstain when it is put before Parliament, plans put in place by the previous Government can continue.

The broader energy policy compromise resulting from the coalition is also welcome news to investors and project developers involved in renewables and carbon capture and storage (CCS) projects. For the most part it seems that it will be business as usual.

In a statement released this afternoon, following a joint address by the new Prime Minister David Cameron and Deputy Prime Minister Nick Clegg, the eagerly anticipated details of the compromise deal reached to secure a stable Government were finally revealed.

The statement sets out the parties' agreement on a broad range of issues, some of which, such as the deficit, electoral reform and the replacement of Trident, have attracted particular media attention. Energy policy issues may not have attracted the media spotlight to the same extent, but they are of critical importance to the country and the proposed low-carbon economy.

A low-carbon, eco-friendly economy

According to the joint statement, the parties agree to implement a programme of measures to fulfil their joint ambitions for a low carbon and eco-friendly economy, including:

  • The establishment of a smart grid and the roll-out of smart meters.
  • Full establishment of feed-in tariffs for electricity as well as the maintenance of banded Renewables Obligation Certificates (ROCs).
  • Measures to promote an increase in energy from waste through anaerobic digestion.
  • The creation of a green investment bank.
  • The provision of home energy improvement paid for by the savings from lower energy bills.
  • Retention of energy performance certificates (while scrapping Home Information Packs).
  • Measures to encourage marine energy.
  • The establishment of an emissions performance standard that will prevent coal-fired power stations being built unless they are equipped with sufficient carbon capture and storage facilities to meet the emissions performance standard.
  • The provision of a floor price for carbon, as well as efforts to persuade the EU to move towards full auctioning of ETS permits.
  • Mandating a national recharging network for electric and plug-in hybrid vehicles.
  • Continuation of the present Government’s proposals for public sector investment in CCS technology for four coal-fired power stations; and a specific commitment to reduce central government carbon emissions by 10 per cent within 12 months.  

The parties also announced that the Government would seek to increase the target for energy from renewable sources, subject to the advice of the Climate Change Committee.

Additional measures which the parties have agreed to implement include:

  • Measures to promote green spaces and wildlife corridors in order to halt the loss of habitats and restore biodiversity.
  • Measures to make the import or possession of illegal timber a criminal offence.
  • The replacement of the Air Passenger Duty with a per flight duty.
  • The establishment of a high-speed rail network.
  • The cancellation of the third runway at Heathrow.
  • The refusal of additional runways at Gatwick and Stansted.  

New nuclear proceeds as planned

The Liberal Democrats have long opposed any new nuclear construction. The Conservatives, by contrast, are committed to allowing the replacement of existing nuclear power stations provided they are subject to the normal planning process for major projects (under a new national planning statement) and provided also that they receive no public subsidy.

By way of compromise, the parties have agreed a process that will allow Liberal Democrats to maintain their opposition to nuclear power while allowing the Government to bring forward the Nuclear National Policy Statement for ratification by Parliament so that new nuclear construction can proceed.

There is a specific agreement that a Liberal Democrat spokesman may speak against the policy statement, but that Liberal Democrat MPs will abstain from voting when the statement is put before Parliament. This vote will not be regarded as an issue of confidence and means that whilst the Liberal Democrats are not helping the designation of the statement by Parliament, nor will they be hindering it, provided that the statement receives sufficient support from the Conservatives and the expected support from Labour opposition MPs.

Whilst designation of the draft energy National Policy Statements is set to continue, there have been no further announcements in relation to the rest of the new planning regime introduced by the Planning Act 2008. Prior to the election the Conservatives had said that they would seek to abolish the Infrastructure Planning Commission (IPC), although it was clear that its replacement by the proposed Major Infrastructure Unit represented more of a change in name than in substance. The Conservatives also proposed that the final decision on whether to grant development consent for Nationally Significant Infrastructure Projects would be made by the Secretary of State rather than by the IPC. In the case of decisions on energy applications, this looks set to hand the ultimate decision-making powers to the new Secretary of State for Energy and Climate Change, the Liberal Democrat Chris Huhne. There may, therefore be some rethinking on this given the new position described above. Project developers will be keen for these issues to be clarified in due course when the final Coalition Agreement covering the full range of policy issues not covered in today's statement is published.

A brighter future

In addition to new nuclear continuing as planned, continued support for renewables and CCS projects through the wider use of feed-in tariffs (with the preservation of the availability of the Renewables Obligation for existing projects) and the establishment of a floor price for carbon will hopefully quicken the progress towards a low carbon economy started under the former Labour Government.