Green Energy Reforms

Increased penalties for pollution and generous subsidies for off-shore wind and nuclear power, were included in a set of reforms announced by the government last week, to launch an estimated £200 billion, low-carbon upgrade of the electricity generating industry. Mechanisms proposed include:
? A feed-in tariff
? Guaranteed payment per megawatt for higher-cost technologies (such as off-shore wind & nuclear power), in addition to the wholesale price paid.
? A defined, minimum carbon price for European Union pollution permits.
? Extra payments to power companies for new gas-fired power plants required as back-up during windless periods.
? New emission standards with increased penalties for fossil-fuel generators.
Although these reforms, if passed into law, should speed up the phasing out of coal-fired power and favour nuclear and off-shore power generation, the consumer it seems will have to pay much higher electricity bills which, according to Ofgem the regulator, could increase from the average of £1,100 today up to £2,000 per household by 2020. This is a consequence of the government having signed up to binding international targets for reducing carbon emissions. To achieve these targets, 30% of electricity generated in the UK will have to come from low-carbon sources (currently at only 7%) by 2020.
Critics respond that replacing all coal-fired plants by modern, gas-fired ones would achieve the same pollution reductions by 2020 at around 10% of the cost, with enough supplies of gas to meet demand for at least another 250 years from e.g. new shale gas discoveries, although this alternative approach would have to rely on viable carbon-capture technologies becoming available by then. The new localism bill giving councils greater powers to veto projects in their areas of responsibility and put before parliament last week by Eric Pickles, the local government secretary, could at the same time undermine key planning for regional, electricity generating and distribution infrastructure, by local councils vetoing the construction of unsightly and disrupting, on-shore wind farms.
Following a period of consultation, a decision by the government next March on a minimum carbon price and a white paper covering these proposed green energy reforms to be published in the spring of 2011, the above mechanisms could be in force by 2013.

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