The RO principally favours onshore and offshore wind investment. Other low-carbon energies, particularly nuclear, have not benefited. And the consumer has borne the cost of the RO. At the time of writing, the full picture of what the government wants is not clear. But it is pursuing five strategic aims:
1. New contracts to support low-carbon energy. The principal one is the feed-in tariff, which guarantees the generator a set premium over the market price. This received its first trial with the solar feed-in tariff scheme that DECC has just scaled back amid much protest from the solar industry. In the case of nuclear, this will probably be allied to a Contract for Differences (CFD). The CFD is set at a fixed price: a premium as measured by an agreed market index would go to the counter-party, who would in turn make up any shortfall to the generator. No decision has been made about the counter-party, but it is almost certain to be a state agency.
2. Carbon Price Support (CPS). The EU Emissions Trading Scheme has failed to deliver high enough carbon prices to make low-carbon energy competitive because member states lack the will to impose the requisite degree of carbon rationing. CPS is proposed as a supplement to current and forecast ETS prices, administered by the Treasury. It would raise the carbon price to £16 a ton in 2013 and by degrees to £30 a ton in 2020.
3. An Emissions Performance Standard (EPS) to set against the most polluting electricity generation. The EPS as proposed would have no material impact. The Commons select committee commented that the future prospect of the EPS being tightened introduces additional political risk.
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