UK: The UK's first Annual Energy Statement

The Government's first annual energy statement, published on Tuesday, provides a useful snapshot of the scale of activity we can expect as the Coalition looks to scope and implement its energy and climate change policies. The actions set out are wide-ranging and include: the reform of the electricity market; a review of Ofgem's regulatory role; supporting the carbon price; the introduction of an emissions performance standard to support carbon capture; a detailed plan for delivering smart meters; the implementation of the Connect & Manage regime; revised proposals in respect of the enduring OFTO regime; review of transmission charging and a further consultation on the draft National Policy Statements.

A number of documents were published alongside the statement, including a 2050 Pathways Analysis, which analyses different ways of meeting the commitment to reduce emissions in the UK by at least 80% by 2050 from 1990 levels and on which views are sought. The document also gives an indication of the likely timings of various consultations and decisions.

Electricity Market Reform: A consultation will be issued in the autumn and a White Paper in spring 2011. The review of the electricity market will include an assessment of the roles that a carbon price, emissions performance standard, revised renewables obligation, Feed-in Tariffs, capacity mechanisms and other interventions could play in delivering the Government's objectives.

Review of Ofgem: The Government is reviewing Ofgem's regulatory role, considering in particular the Government's objectives for independent regulation of the energy sector, the boundary of responsibility between Ofgem and Ministers and Ofgem's statutory duties. A Call for Evidence on this was published on Tuesday.

Carbon Price Support: Subject to the outcome of an autumn consultation, the Government intends to bring forward legislation to reform the Climate Change Levy to support the carbon price in the Finance Bill 2011.

Support for a 30% emissions reduction target by 2020: The Government has once again stated that it wants to see the EU demonstrate its leadership of the global effort by raising its emissions reduction target from -20% to -30%. The language used suggests that the Government supports unilateral action by the EU, rather than making the increase contingent on global action, but this is not explicit.

Carbon Capture: The Government will consult on its plans for an Emissions Performance Standard, which would restrict the amount of carbon dioxide that can be emitted from power stations, as part of the autumn consultation on Electricity Market Reform. Such a policy may be more onerous than the existing CCS-ready requirement for coal-fired power stations. The Government also intends to launch a formal call for future CCS demonstration projects by the end of the year.

Nuclear: The statement confirms the Government's commitment to removing obstacles to new nuclear power, including ensuring that regulators can maintain the level of resource needed to deliver an end to the Generic Design Assessment of new reactors in June 2011. In light of the recommendations agreed at the 2010 Review Conference of the Non-Proliferation Treaty in May this year, the Government is also reviewing its current and anticipated holdings of plutonium and considering plans for its long-term management.

Renewable Heat: It is still not clear whether the Government will implement the Renewable Heat Incentive, with the Government stating that it will set out detailed proposals on how to take forward action on renewable heat through the Spending Review.

Smart Meters: Alongside the statement, the Government and Ofgem published a Prospectus for Smart Meters. This sets out their detailed plans for delivering smart meters.

Connect and Manage: The enduring "connect and manage" regime for grid access will be implemented in August.

OFTO: There will be a further consultation on the enduring regime for offshore transmission (including seeking views on an additional "generator build" option). The Government has also commenced powers to establish the new regime for transitional offshore generation projects and approved new offshore transmission tender regulations to enable Ofgem to run the next transitional tender round.

Transmission Charging Regime: In anticipation of Ofgem's consultation on the continuing suitability of the transmission charging regime, the Government will provide Ofgem with its view of the overall policy context for transmission charging in Great Britain and the high level outcomes that the regime needs to promote.

Green Investment Bank: Proposals for the bank will be published following the Spending Review.

Planning for major infrastructure: As announced earlier this month, a consultation will be published in the autumn on revised draft energy National Policy Statements, which will then be presented to Parliament for ratification in the spring. A detailed implementation plan for planning reform will be published later in the summer.

RO Grandfathering: Support under the Renewables Obligation for electricity from dedicated biomass, energy from waste, anaerobic digestion and advanced conversion technologies will be grandfathered.

Anaerobic digestion: A joint industry/Government action plan to deliver a huge increase in energy from waste through anaerobic digestion will be published in the autumn.

Energy efficiency: The statement also contained a number of proposals aimed at saving energy and supporting vulnerable customers, including the Green Deal, which is aimed at saving householders money by insulating their homes. CERT will be extended until the end of 2012, when it will be replaced with a new obligation. Climate Change Agreements and the CRC will be kept under review to ensure minimal complexity and policy overlap.

Oil & Gas environmental regime: The Government has committed to doubling environmental inspections of offshore oil and gas rigs and will undertake a full review of the oil and gas environmental regime following the outcome of investigations into the causes of the Gulf of Mexico incident.

Oil & Gas infrastructure access: The forthcoming Energy Security and Green Economy Bill will provide that access to UK oil and gas infrastructure is available to all companies to help the exploitation of smaller and more difficult oil and gas fields.

Gas security: Measures on gas security will be introduced.

Further information

To view the Annual Energy Statement and associated documents on DECC's website, please click here

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 29/07/2010.

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