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Government responds to businesses on energy policy

The Government has responded to a letter from the CBI, published in The Times newspaper on 26 January and signed by 18 prominent business leaders, asking for clearer low carbon leadership and energy policy.

The Government has responded to a letter from the CBI, published in The Times newspaper on 26 January and signed by 18 prominent business leaders, asking for clearer low carbon leadership and energy policy.

The lobby group was calling on the Government to deliver a stronger, long-term policy framework for low carbon development, to unlock investment in low carbon projects and to avoid letting energy policy uncertainty threaten future supplies and energy security.

The letter warned: "UK industrial firms already pay higher electricity costs than EU competitors, and spare capacity on our grid is getting squeezed as we phase out older power stations.

"Getting the investment we need to address [falling capacity] requires clear leadership and stable policy from government. We need more of this in 2016."

Its co-signatories included major companies such as Aviva, Lloyds and ScottishPower, and representatives from the renewables industry, such as Renewable Energy Systems.

‘The right environment’

In her response, energy and climate change secretary, Amber Rudd, said: “This Government is taking long-term decisions today to tackle a legacy of under-investment, build a system of energy infrastructure fit for the 21st century and to create the right environment for business to invest in clean, affordable and secure energy”.

Rudd went on to say: “But we don’t apologise for doing this at the same time as working to keep bills as low as possible and making sure that the people that foot the bill, the hardworking families and businesses of Britain, get a good deal.

“We know that old and dirty coal, and some ageing nuclear power plants, will be closing over the next few years, and that’s precisely why we’ve put in place a long-term plan to ensure we have secure, affordable and clean energy supplies that can be relied on now and in the future”.

As part of its response to the CBI letter, the Department of Energy and Climate Change (DECC) outlined ten key actions the Government has taken to secure investment in more secure, renewable energy supplies:

  1. Committed to the first new nuclear plant for a generation at Hinkley Point. 
  2. Boosted innovation funding to over £500 million, including £250m for nuclear innovation and Small Modular Reactors.
  3. Confirmed support for up to 10 Gigawatts (GW) of new offshore wind projects in the 2020s.
  4. Set out plans to close all unabated coal-fired power stations by 2025.
  5. Allocated £295 million for energy efficiency measures in schools, hospitals and other public services.
  6. Introduced new rules that oblige energy suppliers to help households improve their energy efficiency, with funding of £640 million a year allocated for five years from April 2017.
  7. Committed to more than doubling support given to businesses and households to decarbonise heating supplies (from £430 million to £1.15 billion).
  8. Allocated over £300 million for up to 200 new heat networks in communities, leveraging up to £2 billion in private investment.
  9. Raised the UK’s global climate finance commitment by 50 per cent to £5.8 billion over the next five years, to help other countries to reduce their carbon emissions and adapt to climate change.
  10. Signed the Paris Agreement in December, which commits to curbing global greenhouse gas emissions and working towards a low carbon future.

‘Energy gap’

The CBI letter was published on the same day as the results of a new study by the Institute of Mechanical Engineers, which warned that the UK is heading for an unprecedented "energy gap" by the mid-2020s. 

According to its research, demand for electricity could outstrip supply by 40 to 55 per cent as older coal and nuclear plants are phased out, unless urgent action is taken to make up the shortfall in capacity with alternative, low carbon supplies.