Rethink
urged on
electricity
market
shake-up

A cross-party Westminster committee fears the shake-up might fail to deliver change and called for an “urgent rethink” of ministers’ proposals.

The draft Energy Bill would create a system of long-term contracts to give power companies a guaranteed price for the low-carbon electricity they produce.

The move is intended to cut the risk of investment in expensive projects with high up-front costs, such as nuclear reactors and offshore wind farms.

But firms capable of building the infrastructure may be deterred because the Treasury will not underwrite new investment in nuclear and renewable power, the Commons Energy and Climate Change Select Committee warned.

Committee chairman Tim Yeo believed the coalition should use Britain’s AAA credit rating to guarantee risky schemes.

He said: “The Government is in danger of botching its plans to boost clean energy because the Treasury is refusing to back new contracts to deliver investment in nuclear, wind, wave and carbon capture and storage.

“Nobody wants to see a blank cheque written out for green energy, but the Government must provide investors with more certainty about exactly how much money will be available.”

The plans outlined in the draft Energy Bill form the biggest shake-up of the industry since privatisation in the 1980s and are designed to keep the lights on for decades to come.

Ministers hope to reduce reliance on coal-fired power stations and imported energy, and boost support for renewable sources like wind, wave and solar, and carbon capture and storage.

Mr Yeo’s committee spent five weeks taking evidence as part of the pre-legislative scrutiny process before final proposals are put forward later this year.

The Conservative former environment Minister claimed reforming the electricity market was essential, but believed the current plans might increase the power of the Big Six companies rather than widen competition.

He said smaller producers could be “squeezed out” under the shake-up. Mr Yeo added: “The Government has a lot of work to do over the summer to make sure that the Bill is fit for purpose in the autumn.”