A working group of Lords that was asked by the government to provide pre-legislative comments on the draft energy bill has this week published its verdict, declaring that it has "serious doubts" that the proposed reforms will deliver a competitive market for low carbon electricity.
Change Select Committee of MPs, criticising the government for continued uncertainties surrounding key elements of the bill and the decision to leave many important decisions to secondary legislation, "not all aspects of which will be subject to parliamentary scrutiny".
Specifically, the report criticises the lack of information on how the proposed contract for difference (CfD) feed-in tariffs will work for low carbon generators and raises concern that the process for awarding subsidies through the CfD mechanism will be largely at the discretion of ministers.
"The government would have to estimate reasonable prices ("Strike Prices") for electricity generated by each particular means (e.g. gas with or without CCS, offshore wind, nuclear, etc) for the duration of the contract – presumably 15 to 25 years.
"We do not see how the government can do this in any credible way, even with the assistance of the System Operator. Ministers would have few market benchmarks by which to set prices. Furthermore they would need to judge the balance between different generation methods and this depends, among other things, on estimating the long-term future price of fossil fuel and what new technologies might become available."