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New low-carbon electricity generation is cost-effective option for UK power sector investment in 2020s and beyond

A low-carbon electricity supply is the most cost-effective way to meet the need for more generation in the 2020s given the UK’s climate change commitments, the Committee on Climate Change (CCC) says today.

In a new report, Power sector scenarios for the fifth carbon budget, the Committee sets out a range of future options to reduce the UK’s emissions from electricity in 2030. Low-carbon options in the power sector are important to support emissions reduction in other sectors, such as transport and heating, as well as to reduce emissions from the power sector itself.

The new power sector scenarios seek to balance issues of affordability, security of supply and decarbonisation. They indicate different ways, rather than one prescriptive path, through which this balance can be achieved consistent with UK climate change targets.

Power sector scenarios for the fifth carbon budget sets out new analysis the CCC will take into account when it provides its advice to Government on the fifth carbon budget on 26 November 2015. The fifth carbon budget will set the maximum level of domestic emissions between 2028 and 2032 and marks the half-way point from the first carbon budget period (2008-2012) to the 2050 commitment to reduce UK emissions by at least 80% relative to 1990 levels.

Assessing the UK’s obligations under the Climate Change Act, alongside the requirement to ensure competitiveness, affordability and security of the UK power supply, the Committee finds that:

  • Investments to 2020 are largely committed already. These will reduce power sector carbon intensity from around 450 gCO2/kWh today to around 200-250 gCO2/kWh. Households are currently paying around £45 a year on their electricity bill to support this investment, and will pay around £105 by 2020 (of a total bill of around £500).
  • New investment in power generation will be needed in the 2020s to replace retiring coal and nuclear power and to meet future increases in energy demand.
  • Several low-carbon sources of power are likely to be cost competitive with new gas-fired generation facing a carbon price during the 2020s. Mature options, like onshore wind and solar, are at that stage already. Less mature options, like carbon capture and storage (CCS) and offshore wind, will require continued support into the 2020s if they are to reach maturity. These both represent good value investments for a society committed to climate targets.
  • Balancing all factors, power sector emissions of below 100 gCO2/kWh are an appropriate aim for 2030. The range of scenarios examined suggest that power sector emissions towards the upper end of the carbon intensity range of 50-100 gCO2/kWh, previously identified as being suitable for 2030, are appropriate. Emissions would be around 55 MtCO2 lower than if investment in the 2020s was focused solely on gas-fired generation.
  • There will be additional costs on bills from low-carbon investment in the 2020s. Under central assumptions, the impact on annual household bills of supporting low-carbon investment would increase from around £105 in 2020 to a peak of around £120 in 2030 (i.e. low-carbon investment in the 2020s would add around £15 to the annual electricity bill for a typical household).
  • Increasing system flexibility will be important to ensure security of supply at lowest cost. Developing a more flexible electricity system with responsive demand, interconnection to other markets and more electricity storage will support security of supply, reduce emissions and reduce costs. The Power sector scenarios report includes new analysis of the value of flexibility and assigns costs to intermittent generation, to cover their integration to the grid and the need for back-up capacity.

Lord Deben, Chair of the Committee on Climate Change, said: “The 2020s are crucial in setting the direction for UK power generation, and to ensure the UK can meet its 2050 climate change commitments cost-effectively. The key tools are already in place to deliver the investment in low-carbon generation that is required. The Government must now urgently clarify the direction of future policy to ensure the power sector can decarbonise at lowest cost to businesses and households.”