7 Emissions Performance Standard
199. We have expressed our dissatisfaction with
the Government's proposals for an Emissions Performance Standard
(EPS) on numerous previous occasions.[252]
We still believe that introducing the measure as currently designed
would be pointless and would merely add complexity to an already
overly-complicated package of reforms.
200. In this section, we highlight new factors
that have emerged during the course of our pre-legislative scrutiny.
We do not rehearse the arguments made in our previous reports.
We refer interested readers to our previous inquiries on Emissions
Performance Standards, Electricity Market Reform and Energy Security.[253]
Grandfathering
201. The principle of grandfathering means that
once a fossil fuelled power plant receives building consent under
a particular emissions limit, the plant will not be affected by
any subsequent changes to that level for a pre-determined period.
After an "informal consultation", DECC announced in
March this year that the initial EPS of 450g/kWh would be grandfathered
until 2045. [254] This
initial EPS will itself be reviewed in 2015.
202. Energy companies told us that these grandfathering
arrangements were necessary to bring forward investment in new
gas-fired generation.[255]
However, environmental organisations believed that the 30 year
grandfathering period risked locking the UK into a high-carbon
electricity system.[256]
This echoed the comments made by the Chair of the Committee on
Climate Change in a letter to the Secretary of State earlier this
year that while the EPS proposal "could be compatible with
power sector decarbonisation requirements to meet carbon budgets,
[it] also carries the risk that there will be too much gas-fired
generation instead of low carbon investment".[257]
203. Simon Skillings (E3G) warned that if the
EPS was grandfathered until 2045, the only lever available to
future governments to regulate emissions from unabated gas-fired
plant would be the carbon price. He said:
If you throw away that lever [an EPS that affects
gas], you could end up in the situation where we have a hugely
inefficient vehicle to drive this investment, which is a very,
very, very high carbon price—and
it will need to be very, very high. Germany […] has exactly
this problem. It has lots of coal on the system, and it doesn't
matter how much renewables it subsidises on the system; if the
carbon price stays at low levels, the coal is going to be pumping
it out. It can't get rid of the carbon. This is where an emissions
performance standard provides another tool, and we are going to
face that situation with gas plant as we go through the 2020s.[258]
204. The Government's intention to review
the EPS in 2015 is another source of uncertainty for investors.
It may even cause a "dash for gas" itself, if investors
rush to build gas plant before the review. We
are concerned that DECC's decision to grandfather the EPS until
2045 is not compatible with our long-term decarbonisation objectives.
If too much new unabated gas-fired plant comes forward under these
arrangements, future governments could be faced with a tough decision
either to miss the carbon budgets or to set an extremely high
carbon price, which would ultimately increase costs to consumers.
We recommend that a shorter grandfathering period commensurate
with decarbonising the electricity system by 2030 should be adopted.
Exemption for carbon capture
and storage
205. The Government intends to exempt projects
that form part of the UK Carbon Capture and Storage (CCS) Programme
on a case-by-case basis. The draft Bill defines stations that
are eligible for exemption as "a generating station at which
carbon capture and storage technology is or is to be, or has been,
used in commercial electricity generation for the purposes of
or in connection with a CCS demonstration project".[259]
206. Witnesses from environmental NGOs warned
that new partial CCS plants could still produce significant greenhouse
gas emissions.[260]
The RSPB and WWF provided an example: "the proposed 1852MW
coal plant in Hunterston, Scotland, would emit 587-650gCO2/kWh,
and emissions from year one would be equivalent to adding 63%
to Scotland's annual power sector emissions".[261]
The NGOs concluded that the CCS exemption could undermine decarbonisation
ambitions.[262]
The CBI believed that the CCS exemptions were necessary to avoid
undermining the development of CCS technology.[263]
207. CCS is a special case and
it is important not to risk delaying or undermining the development
of the technology. But DECC should ensure that the Bill provides
sufficient safeguards so as to avoid the unintended consequence
of undermining decarbonisation. There may be merit in the inclusion
of a minimum proportion of emissions to be captured by CCS plants
in clause. 37
Parliamentary Procedure
208. The Secretary of State will have the power
to exempt plant from the EPS in the case that he or she thought
there were security of supply concerns.[264]
According to DECC's Delegated Powers Memorandum on the draft Energy
Bill, this decision would be an "executive act" and
therefore would not be subject to Parliamentary scrutiny, although
the draft Bill does provide for on Order under this section to
be laid before Parliament after it has been made.
209. We believe that any decision
to exempt plant from the EPS on energy security grounds should
be subject to Parliamentary scrutiny, even if this scrutiny has
to be retrospective.
252 Energy and Climate Change Committee, Eighth Report
of Session 2010-12, The UK's Energy Supply: Security or Independence?,
HC 1065 Back
253
Energy and Climate Change Committee, First Report of Session 2010-12,
Emissions Performance Standards, HC 523; Energy and Climate Change
Committee, Electricity Market reform; Energy and Climate Change
Committee, The UK's Energy Supply: Security or Independence? Back
254
"Davey sets out measures to provide certainty to gas investors",
DECC press release 2012/025, 17 March 2012 Back
255
Ev 151, Ev w74, Ev 172, Ev 178, Ev 206, Ev w154, Ev 227, Q 92
[Mr Sambhi and Mr McElroy] Back
256
Ev w26, Ev w34, Ev w37, Ev 137, Ev 187, Ev w163, Q 259 [Mr Molho]
Back
257
Committee on Climate Change, 27 March 2012, Public letter from
Lord Adair Turner to the Secretary of State Back
258
Q 126 Back
259
Draft Energy Bill, CM 8362, May 2012, Part 1, Clause 37, p 91 Back
260
Ev w26, Ev 137, Ev w37, Ev 187, Ev w126, Back
261
Ev w26, Ev 187 Back
262
Ev w26, Ev 137, Ev w37, Ev 187 Back
263
Ev 206 Back
264
Electricity Market Reform: policy overview, Annex D: Electricity
Market Reform: Update on the Emissions Performance Standard, May
2012 Back
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