Annex D 1990 To 2020

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Annex D

Major events in the Energy Industry


2020 Electricity
In July 2020 construction work commenced on what is set to be the world’s
longest electricity interconnector, linking the UK’s power system with
Denmark. Due for completion in 2023, the 765-kilometre ‘Viking Link’ cable
will stretch from Lincolnshire to South Jutland in Denmark.

In July 2020 approval was granted for the Vanguard offshore wind farm in
Norfolk. The 1.8GW facility consisting of up to 180 turbines will generate
enough electricity to power 1.95 million homes.

In May 2020 approval was granted for Britain’s largest ever solar farm at
Cleve Hill, near Whitstable in Kent. The 350MW facility, comprising of
800.000 solar panels, will begin operation in 2022 and will provide power to
around 91,000 homes.

Energy Prices
In February 2020 the energy price cap was reduced by £17 to £1,162 per
year, from 1 April for the six-month “summer” price cap period.

2019 Climate Change


The Government laid draft legislation in Parliament in early June 2019 to
end the UK’s contribution to climate change, by changing the UK’s legally
binding long-term emissions reduction target to net zero greenhouse gas
emissions by 2050. The new target is based on advice from the
government’s independent advisors, the Committee on Climate Change
(CCC).

The legislation was signed into law in late June 2019, following approval by
the House of Commons and the House of Lords.

Energy Policy
A joint government-industry Offshore Wind Sector Deal was announced in
March 2019, which will lead to clean, green offshore wind providing more
than 30% of British electricity by 2030.

The deal will see industry invest £250 million, include a new Offshore Wind
Growth Partnership to develop the UK supply chain with global exports set
to increase fivefold to £2.6 billion by 2030, as well as challenging the sector
to more than double the number of women entering the industry to at least
33% by 2030, with the ambition of reaching 40% - up from 16% in 2019.

Electricity
New solar homes and businesses creating and exporting electricity to the
grid will be guaranteed a payment from suppliers under new laws introduced
by the government in June 2019. The Smart Export Guarantee (SEG) will
ensure small-scale electricity generators installing solar, wind or other forms
of renewable generation with a capacity up to 5MW will be paid for each unit
of electricity they sell to the grid - tracked by their smart meter.

Energy Prices
In August 2019 the energy price cap was reduced by £75 to £1,179 per
year, from 1 October for the six-month “winter” price cap period.

In February 2019 the energy price cap was increased by £117 to £1,254 per
year, from 1 April for the six-month “summer” price cap period.
2018 Energy Prices
In November 2018 Ofgem announced the final level of the price cap,
following the statutory consultation published in September, at £1,137 per
year for a typical dual fuel customer paying by direct debit. Price protection
for 11 million customers on poor value default tariffs came into force on 1
January 2019. The price cap level will be updated in April and October every
year to reflect the latest estimated costs of supplying electricity and gas,
including wholesale energy costs.

In February 2018 the Domestic Gas and Electricity (Tariff Cap) Bill was
introduced to Parliament, which will put in place a requirement on the
independent regulator, Ofgem, to cap energy tariffs until 2020. It will mean
an absolute cap can be set on poor value tariffs, protecting the 11 million
households in England, Wales and Scotland who are currently on a
standard variable or other default energy tariff and who are not protected by
existing price caps.

An extension to Ofgem’s safeguard tariff cap was introduced in February


2018 which will see a further one million more vulnerable consumers
protected from unfair energy price rises.

Nuclear
In June 2018 the Government announced a deal with the nuclear sector to
ensure that nuclear energy continues to power the UK for years to come
through major innovation, cutting-edge technology and ensuring a diverse
and highly-skilled workforce. Key elements include:
• a £200 million Nuclear Sector Deal to secure the UK’s diverse
energy mix and drive down the costs of nuclear energy meaning
cheaper energy bills for customers;

• a £32 million boost from government and industry to kick-start a new


advanced manufacturing programme including R&D investment to
develop potential world-leading nuclear technologies like advanced
modular reactors;

• a commitment to increasing gender diversity with a target of 40%


women working in the civil nuclear sector by 2030.
2017 Energy Policy
In October 2017 the Government published The Clean Growth Strategy:
Leading the way to a low carbon future, which aims to cut emissions while
keeping costs down for consumers, creating good jobs and growing the
economy.
Measures set out in the Strategy include funding of:

• up to £10 million for innovations that provide low carbon heat in


domestic and commercial buildings;

• up to £10 million for innovations that improve the energy efficiency


of existing buildings;

• an extra £14 million for the Energy Entrepreneurs Fund, including a


new sixth fund;

• up to £20 million in a Carbon Capture and Utilisation demonstration


programme;

• up to £20 million to demonstrate the viability of switching to low


carbon fuels for industry;

• up to £20 million to support clean technology early stage funding.

Electricity
As part of the Clean Growth Strategy the Government announced in
October 2017 that up to £557 million will be made available for less
established renewable electricity projects, to drive economic growth and
clean up the energy system.

The foundation stone for the new ElecLink electricity connection between
Britain and France was laid in February 2017. The interconnector will run
through the Channel Tunnel between Sellindge in the UK and Les
Mandarins in France, and will provide 1000MW of electricity, enough
capacity to power up to 2 million homes.

Energy Efficiency
Homes across Great Britain will get extra support to make their homes
cheaper and easier to keep warm thanks to reforms that came into force in
April 2017. Changes to the Energy Company Obligation (ECO) will make
sure energy companies give support to people struggling to meet their
heating bills, with plans announced to extend the scheme from April 2017 to
September 2018.

Smart Meters
The Smart Meters Bill was introduced to Parliament in October 2017. The
Bill, first announced in the Queen’s Speech in June 2017, will enable the
Government to continue to regulate the roll-out of smart meters, with every
home and small business in Great Britain being offered a smart meter by the
end of 2020.
2016 Energy Policy
The Energy Bill received Royal Assent in May 2016. In summary the Bill:

• Creates the framework to formally establish the Oil and Gas


Authority (OGA) as an independent regulator, taking the form of a
government company, so that it can act with greater flexibility and
independence. It gives the OGA new powers including: access to
external meetings; data acquisition and retention; dispute resolution;
and sanctions. It also enables the transfer of the Secretary of State
of the Department for Business, Energy and Industrial Strategy
(BEIS) existing regulatory powers in respect of oil and gas to the
OGA. The Secretary of State’s environmental regulatory functions in
relation to oil and gas are not transferred to the OGA.

• Enables more comprehensive charging of the offshore oil and gas


industry in relation to environmental regulatory functions carried out
by BEIS.

• Makes local communities the primary decision makers on new


onshore wind developments, alongside measures taken by the
Department for Communities and Local Government. It removes the
need for the Secretary of State of BEIS consent for large onshore
wind farms (over 50 megawatt) in England and Wales under the
Electricity Act 1989.

• Brings forward the early closure of the Renewables Obligation


subsidy scheme to new onshore wind developments in Great
Britain.

Electricity
The Government gave development consent to the Hornsea Project Two
offshore wind farm off the coast of Yorkshire in August 2016. Once built, the
windfarm will deliver 1,800 megawatts of low carbon electricity to around 1.8
million UK homes.

The Government gave consent in January 2016 for a new electric line
connection, which will form a major part of the infrastructure needed for the
transmission of electricity from Hinkley Point C nuclear power station. The
project will be the first scheme to use the new T-pylon, which resulted from a
competition held in 2011 by the Royal Institute of British Architects, BEIS
and National Grid to explore the potential for a new generation of pylon
design

Nuclear
Following a comprehensive review of the Hinkley Point C project, and a
revised agreement with EDF, the Government in September 2016 decided
to proceed with the first new nuclear power station for a generation. A new
legal framework will be imposed on future foreign investment in Britain’s
critical infrastructure, which will include nuclear energy and apply after
Hinkley.
2015 Climate Change
A new global climate agreement was agreed at the United Nations
conference on climate change in Paris in December 2015. For the first time
ever 195 countries, including the world’s largest emitters, have committed to
act together to combat climate change and be held equally accountable. The
agreement sets out a clear long-term goal of net zero emissions by the end
of the century, showing that the world is committed to decarbonising.
Progress against this goal will be independently assessed in 2018 and every
five years thereafter.

Coal
Kellingley Colliery located at Beal in North Yorkshire, closed on 18
December 2015, marking the end of deep-pit coal mining in the UK.

Electricity
The Government gave approval in October 2015 for the construction of the
Ferrybridge Multifuel 2 Power Station at Knottingley, West Yorkshire. If built,
the power station will be capable of producing up to 90MWe of electricity, by
burning fuel derived from refuse and industrial and commercial waste, such
as wood, which would have originally ended up in landfill.

The Government gave approval in September 2015 for the construction of a


new gas power plant in Sutton Bridge, Lincolnshire. If built, the station will
produce up to 1.8 GW of electricity.

The Government gave approval in August 2015 for the construction of an


offshore windfarm off the UK North East coast. If built, Dogger Bank
Teesside A and B Offshore wind project will include up to 400 wind turbines
in total, across two offshore wind generating stations, each with an installed
capacity of up to 1.2 GW. Onshore elements will be located in Redcar and
Cleveland, with the potential to generate enough green electricity to power
up to 1.8 million British homes.

The Government approved the construction of two gas-fired power


generation plants in July 2015 by Progress Power Ltd in Eye, Suffolk, and
by Hirwaun Power Limited near Aberdare in South Wales. Both plants will
have a generating capacity of up to 299 megawatts of electrical output.

Planning consent was given in June 2015 for the construction of the world’s
first tidal lagoon. If built, turbines in the proposed six-mile horseshoe shaped
sea wall around Swansea Bay in Wales could generate around 500GWh per
year of low carbon electricity.

The Government gave consent to the Dogger Bank Creyke Beck A and B
offshore wind project off the coast of Yorkshire in February 2015. Once built
it will generate enough electricity to power almost 2 million homes.
2015 Energy Policy
(continued) The Government set out in November 2015 their vision for an energy
system that puts consumers first, delivers more competition, reduces the
burden on bill-payers and ensures enough electricity generation to power
the nation, supported by 4 key policy priorities:

• Consultation on ending unabated coal-fired power stations by 2025

• New gas-fired power stations a priority

• Commitment to offshore wind support completes commitment to


secure, low-carbon, affordable electricity supplies

• Move towards a smarter energy system

A new Energy Bill was proposed in the Queen's Speech in May 2015 which
will:
• Ensure there will be affordable and reliable energy for businesses
and families;

• Give the Oil and Gas Authority the powers it needs to become a
robust, independent and effective regulator, and enable it to
maximise the economic recovery of oil and gas from UK waters.

• Change the law to give local communities the final say on wind farm
applications.

The Infrastructure Act became law in February 2015 enshrining new


measures to make it easier, quicker and simpler to get Britain building. The
legislation will give local people the right to buy a stake in renewable energy
projects, as well as boosting energy security and economic growth by
extracting domestic shale gas, which has the potential to create jobs,
making the UK less reliant on imports from abroad and so help tackle
climate change.

Fuel Poverty
A new Fuel Poverty strategy, the first for over a decade, was launched in
March 2015 which outlines the challenges and actions for the next 15 years
to ensure Government take the right steps to tackle fuel poverty and to get
help to those who need it most. A new legally binding target, in force since
December 2014, forms a key part of the new strategy; it requires that as
many fuel poor homes as reasonably practicable, achieve a minimum
energy efficiency rating of a Band C, by 2030. The strategy also set out
interim milestones: to lift as many fuel poor homes in England as is
reasonably practicable to Band E by 2020; and Band D by 2025 .
2014 Carbon Capture and Storage (CCS)
In February 2014 the Government agreed a multi-million pound contract for
engineering, design and financial work on the Peterhead CCS project in
Aberdeenshire with Shell, to take their gas carbon capture and storage
(CCS) project into the next stage of development. The world’s first planned
gas CCS project, Peterhead involves installing carbon capture technology
onto SSE’s existing Peterhead gas power plant, and transporting the CO2
100km offshore for safe, permanent storage 2km under the North Sea in the
old Goldeneye gas field. If built, the project could save 1 million tonnes CO2
each year and provide clean electricity to over 500,000 homes.

Climate Change
At a meeting in October 2014 the European Union reached a deal to cut
greenhouse gases by at least 40% domestically by 2030. The target is part
of a package of measures to make Europe’s energy system more secure,
sustainable and competitive.

Electricity
The Government gave consent to the Hornsea Project One offshore wind
farms off the coast of Yorkshire in December 2014. Once built, the wind
farms are expected to generate enough electricity to power more than
800.000 homes.

The Government gave consent to the Walney extension offshore wind farm
in the Irish Sea in November 2014. Once built, the wind farm is expected to
generate enough electricity to power over half a million homes.

In October 2014 the Norwegian Government granted a licence for the


longest sub-sea electricity interconnector in the world, to be built between
the UK and Norway. The interconnector, known as NSN, will have a
capacity of 1400 megawatt (MW), and is planned to be commissioned in
2020.

The Government provided £10 million worth of grant funding to the Meygen
project in August 2014. The project will see the world’s biggest tidal array be
built in North Scotland and will provide enough electricity to power 175,000
homes.

The Government gave consent to the Rampion offshore wind farm off the
coast of Sussex in July 2014. Once built it is expected to generate enough
electricity to power approximately 450,000 homes.

The Government gave consent to the East Anglia One offshore wind farm in
June 2014. Once built it is expected to generate enough electricity to power
approximately 820,000 homes.

In April 2014 the Government announced that eight renewable electricity


projects were offered under the Final Investment Decision Enabling
Programme (launched in advance of the Contracts for Difference (CfD)
regime being put in place, which forms part of the Electricity Market Reform
programme). They include offshore wind farms, coal to biomass conversions
and a dedicated biomass plant with combined heat and power, which could
add a further 4.5GW of low-carbon electricity to Britain’s energy mix (or
around 4% of capacity), generating enough clean electricity to power over
three million homes.
2014 Energy Efficiency
(continued) The Green Deal Home Improvement Fund (GDHIF) was launched in May
2014 with up to £120m available in 2014-15. The GDHIF is a new,
innovative home improvement scheme open for all householders from early
June. The scheme means householders could get up to £7,600 back on
incentives covering a range of 13 energy efficiency improvements, including
solid wall insulation, new heating systems and glazing.”

The Government announced proposals for a set of changes to ECO in


December 2013. These include: extending through to 2017, with new
targets; reducing the ambition of the Carbon Saving Target element; and
allowing new measures (loft and standard cavity wall insulation, and district
heating) to be eligible under that element. The Government published a
consultation on these proposals in March 2014, and intends subject to
consultation that revised regulations will come into force later in 2014, but
with many changes taking effect as from 1 April 2014.

Energy Policy
In March 2014 a range of energy policy measures were announced in the
Budget, these include:
• Carbon Price Floor (CPF) - capping the Carbon Price Support (a
tax on fossil fuels used to generate electricity) at £18.00 from 2016–
17 to 2019–20;

• Energy intensive industries – these industries will continue to be


compensated for the costs of the EU Emissions Trading Scheme (ETS)
and Carbon Price Floor (CPF) until 2019–20. There will be a new
compensation scheme for the price of the Renewables Obligation and
small scale feed-in-tariffs from 2016–17.

• CHP - the Government is exempting fuel used to generate good quality


electricity by Combined Heat and Power plants from the Carbon Price
Floor (CPF), where that electricity is used onsite.

• Competition and small businesses - reaffirming the Government’s


commitment to make energy markets more competitive for small
and very small businesses.
.
• Oil & Gas industry - investment to the tune of £1.9 million for 2014–15
and £5 million for 2015–16 to fund the establishment of a new body to
take stewardship of the UK’s oil and gas resources; introducing a new
tax allowance to encourage offshore operators to invest further in new
and existing ultra-high-pressure, high-temperature fields in the North
Sea, and bringing forward a new tax allowance which will encourage
further exploration of promising onshore shale gas resources.

• Carbon Capture and Storage innovation - the Government is providing


£60m for low carbon energy innovation to Carbon Capture and Storage
(CCS) technologies that have significant potential to reduce the cost of
low carbon generation to the UK
2014 Oil and Gas
(continued) As part of the Budget announcement in March 2014, details of how the
Capacity Market is being designed ahead of the first auction being held in
December 2014 were published. The Capacity Market will help drive new
investment in gas demand side capacity, and get the best out of the existing
generation fleet as the UK moves to a low carbon electricity future. The
Capacity Market is designed to ensure:
• 15 year capacity agreements will be available to new capacity
providers;

• Existing capacity will be able to access rolling one year agreements;

• Penalties for unreliable capacity will be capped;

• The capacity auction’s prices will be capped to protect consumers.

Sir Ian Wood’s review into maximising North Sea oil and gas reserves was
published in February 2014. The Review announced:
• a joint commitment between government and the industry to ensure
production licences are awarded on the basis of recovering the
maximum amount of petroleum from UK waters as a whole;

• greater collaboration between industry and government;

• a new independent regulator to supervise licensing and ensure


maximum collaboration between companies to explore, develop and
produce oil and gas.

Renewable Heat
In April 2014 the Government launched the domestic Renewable Heat
Incentive to encourage a switch to renewable heating system in the
domestic sector. This financial incentive scheme is open to homeowners,
private landlords, social landlords and self-builders and is targeted at, but
not limited to, homes off the gas grid. The scheme supports air to water heat
pumps; biomass only boilers and biomass pellet stoves with integrated
boilers; ground to water and water to water source heat pumps; flat plate
and evacuated tube solar thermal panels.

Renewables
In March 2014, Siemens announced its decision to invest £160 million in
wind turbine production and installation facilities in Yorkshire creating more
than 1,000 new jobs in the Hull area. The plan will be spread across two
sites comprising:
• the Green Port Hull project construction, assembly and service
facility, and

• a new rotor blade manufacturing facility in East Riding.


2013 Carbon Capture and Storage (CCS)
In December 2013 the Government announced its intention to award a contract for
detailed design and planning, known as a FEED study to the White Rose CCS project,
based at the Drax site. The White Rose proposal is to build a new state-of-the-art 426
MWe (gross) clean coal power plant with full carbon capture and storage, bringing clean
electricity to over 630,000 homes and capturing approximately 2 million tonnes of CO2 per
year.

Coal
In March 2013 the Daw Mill Colliery in Warwickshire closed following a major fire. The fire,
the largest seen in a UK coal mine in over 30 years, brought an end to 47 years of coal
production at Daw Mill.

Electricity
In July 2013 National Grid announced that T-pylon, the winner of the Pylon Design
Competition, is being offered for the first time in the UK for a new electricity connection in
Somerset. The Hinkley Point connection which runs between Bridgwater and Avonmouth
is needed to carry all the new electricity generation planned for the South West.

The Government gave consent to Galloper Wind Farm Limited in May 2013 to construct a
504MW wind farm off the coast of Suffolk and related infrastructure at Sizewell which will
connect the wind farm to the electricity grid system. The 140 turbine development is
expected to provide enough electricity to power the equivalent of as many as 500,000
homes a year when completed in 2017.

The Government gave consent to Ecotricity in February 2013, to construct a 66MW wind
farm in East Heckington, Lincolnshire. It is estimated that the turbines will provide enough
electricity to power the equivalent of as many as 39,700 homes a year.

Energy Efficiency
The Green Deal scheme, the Coalition Government’s new initiative to transform Britain’s
homes, was launched in January 2013, giving people the opportunity to transform their
homes by paying for energy efficient home improvements with the savings on their energy
bills.

At the same time the Energy Company Obligation (ECO) came into force, working
alongside the Green Deal, with the aims of saving carbon by supporting energy efficiency
measures in harder to treat homes and enabling the installation of efficient boilers and
insulation into the homes of vulnerable people across Great Britain.
2013 Energy Policy
(continued) The Energy Bill completed its passage through both Houses of Parliament and was
granted Royal Assent in December 2013. The Energy Act 2013 will now establish the
legislative framework for delivering secure, affordable and low carbon energy. The Act
includes provisions on:
• Electricity Market Reform (EMR) - the Act puts in place key measures to attract
£110 billion investment needed to replace current generating capacity and to
upgrade the grid by 2020, and to cope with the UK’s rising demand for electricity;

• Decarbonisation – the Government will set a 2030 decarbonisation target range


for the electricity sector in secondary legislation;

• Protecting consumers - the Act includes provisions on setting a limit on the


number of energy tariffs offered to domestic consumers; requiring the automatic
move of customers from poor value closed tariffs to cheaper deals, and requiring
suppliers to provide information to consumers on the best alternative deals
available.

In December 2013 the Government announced a series of proposals to reduce the impact
of energy company price rises which should make British households on average £50
better off. These include:
• No reduction in help currently available to vulnerable households;

• Safeguarding green jobs;

• For people moving home there will be help in installing energy saving measures in
order to cut their bills through improved energy efficiency.

In October 2013 the Government published its Annual Energy Statement, alongside the
Statutory Security of Supply Report. The statement detailed a number of new important
measures aimed at giving consumers more control including:
• Energy companies must make switching suppliers faster for consumers;

• Energy companies will be required to include a QR (Quick Response) code on


energy bills;

• Energy companies should be more open about how they treat credit balances in
consumers’ accounts, making every effort to return money to customers with
closed accounts;

• Ofgem will carry out a market assessment every year, working with the Office of
Fair Trading and the new Competition and Market Authority to monitor market
participants and ensure the market is working for residential and small business
consumers and that all suppliers can compete fairly;

• Ofgem will also carry out a detailed assessment of energy suppliers’ financial
reporting practices and set out necessary steps to improve transparency – so
consumers can see where their money is going.
2013 In June 2013 the Government announced details of vital reforms for keeping the lights on
(continued) and emissions and bills down. These reforms also highlighted the potential scale of
investment, growth and job opportunities available in the energy economy. The reforms
include:
• Government action to unlock up to £110 billion energy infrastructure investment
and support up to 250,000 jobs by 2020;

• Capacity Market to be initiated in 2014 to bring on gas and other flexible electricity
supply to meet future demand and reduce risks to security of supply from winter
2018;

• Renewable Strike Prices to help renewables contribute more than 30 per cent of
total power by 2020.

In April 2013, the carbon price floor - a tax on carbon - came into effect. As part of the scheme,
changes were made to the Climate Change Levy (CCL), setting up new carbon price support
(CPS) rates of CCL for gas, solid fuels and liquefied petroleum gas (LPG) used in electricity
generation.

In March 2013 Ofgem published the final domestic proposals from its Retail Market
Review (RMR), proposing a new set of rules for the retail market to allow consumers to
make better choices about their gas and electricity supply. The proposals from this review
included reducing complexity for consumers when choosing tariffs, and arming consumers
with more useful information when choosing their gas or electricity supplier.

In March 2013 the Government published ‘The Future of Heating: Meeting the Challenge’
setting out an action plan to ensure affordable, secure, low carbon heating plays an
important role in the nation’s energy mix. The action plan looks at the potential to cut
emissions from heat across the whole UK economy and focuses on a number of key
actions to spur on the move to low carbon heating alternatives and drive forward green
growth.

In January 2013, the Office of Fair Trading reported that on the basis of evidence
gathered, that competition is working well in the UK road fuel sector, although it identified
an absence of pricing information on motorways as a concern. In response to the report,
the Government announced in March 2013 that it would work with motorway service
stations and other relevant bodies to improve the availability and visibility of motorway fuel
price information for motorway users.

The Government tabled new clauses to the Energy Bill in February 2013, to ensure that
consumers get a better deal on their energy bills, and to press ahead with decarbonising
the power sector by 2030. The complexity and number of energy tariffs available for
consumers will be reduced, and bills simplified, to deliver on the Prime Minister’s
commitment to help consumers get the cheapest tariff available. Clauses were also tabled
to grant Government powers to set a 2030 decarbonisation target range for the electricity
sector in 2016, once the Committee on Climate Change has provided advice on the level
of the 5th carbon budget, and when the level of this carbon budget is set in law.

Fuel Poverty
Through the Energy Act 2013, the Government has laid the ground for a new legal
framework to monitor fuel poverty in England using the Low Income High Costs Indicator
(LIHC). This new measure of fuel poverty was first proposed in Professor Hills’ review of
Fuel Poverty and following consultation, the Government confirmed its intention to adopt
the indicator in July 2013. In the strategic framework document, ‘Fuel Poverty: a
framework for future action’ the Government set out how the new indicator will inform the
strategic approach to tackling fuel poverty, including setting a new fuel poverty target
which will be underpinned by a new fuel poverty strategy.
2013 Nuclear
(continued) Planning consent was given by the Government in March 2013 for construction of the first
new nuclear power station in the UK since 1995. The station at Hinkley Point, Somerset –
to be operated by NNB Generation - will generate enough low carbon electricity to power
the equivalent of five million households, making it one of the largest power stations in the
UK.

Oil and Gas


In October 2013 the Government worked closely with the management, union, key
stakeholders and the Scottish Government to help resolve the industrial dispute at
Grangemouth oil refinery, ensuring that 800 jobs were saved. The Grangemouth complex,
Scotland’s largest industrial site, produces petrochemicals and supplies fuels primarily to
customers in Scotland, northern England and Northern Ireland.

In May 2013, officials from the European Commission carried out unannounced
inspections at the premises of several companies active in the crude oil, refined oil
products and biofuels sectors. The Commission had concerns that the companies may
have colluded in reporting distorted prices to a Price Reporting Agency to manipulate the
published prices for a number of oil and biofuel products.

The Government gave consent to Statoil in February 2013, to drill the Mariner heavy oil
field. At its peak the field is expected to produce around 55,000 barrels of oil per day, five
per cent of UK daily production.

Renewables
In December 2013 the Drax coal-to-biomass conversion plant in North Yorkshire was
officially opened. The plant will burn wood pellets rather than coal, which will reduce
carbon emissions by 80 compared to coal and provide enough low carbon power to
supply around 1 million homes

In July 2013 the Government gave approval for a 288 turbine offshore wind farm off the
Lincolnshire and Norfolk coast, which will be capable of providing power to 820,000
homes.

In July 2013 the Government gave approval for a 99.9MW biomass power station at Blyth
Harbour, Northumberland, which will be capable of providing power to 170,000 homes.

In March 2013 the Government gave approval for a 28 turbine wind power development
at Brechfa Forest West, Carmarthenshire, which will be capable of providing power to
39,700 homes.

In February 2013 the Government gave approval for an extension at one of the first
offshore wind farms built in the UK. Up to 17 new turbines will be added to Vattenfall’s
Kentish Flats offshore wind farm, which already hosts 30 turbines. Once extended it is
estimated that the wind farm will be capable of providing power to an additional 35,000
homes.
2012 Carbon Capture and Storage (CCS)
In April 2012, the Government launched a new £1bn competition for CCS. At the same
time a road map was published setting out the steps that the Government is talking to
develop the industry.

Electricity
In September 2012 Ireland’s first electricity link to Great Britain was officially opened.
The EirGrid East West Interconnector runs between Deeside in North Wales and
Woodland, County Meath in Ireland. Approximately 260km in length, the underground
and undersea link has the capacity to transport 500 megawatts - enough energy to
power 300,000 homes. The Interconnector will carry electricity both ways, benefiting
consumers by helping to improve security of supply, increase competitiveness and to
encourage the growth of renewable energy generation.

In July 2012, consent was given by the Government for the construction of two wind
farms off the Norfolk Coast with a combined capacity of over 1GW. This means that
6.6GW of offshore wind power is now either operational, under construction or
consented in the UK. The two wind farms at Race Bank (580MW) and Dudgeon
(560MW) in the Greater Wash could generate enough electricity to power around
730,000 homes. The projects represent
around £3bn of investment.

In May 2012, the Government gave consent to Vattenfall for the Pen Y Cymoedd
project, a 299MW wind farm between Neath and Aberdare in South Wales. Made up of
76 turbines, it will have the highest generating capacity of any onshore wind farm in
England and Wales, generating enough electricity to power up to 206,000 homes a
year.

In March 2012, the Government gave consent to E.ON Climate and Renewables for a
new biomass power station at Royal Portbury Dock in the Port of Bristol, North
Somerset. The 150MW power station will be able to power up to 160,000 homes.

In February 2012, the world’s oldest operating nuclear power station, Oldbury, near
Bristol, finally stopped producing electricity, after 44 years of safe generation. Since it
opened in 1967, Oldbury’s twin reactors have generated 137.5 TWh of electricity,
enough to power one million homes for over 20 years.

Energy Efficiency
A new EU Energy Efficiency Directive was introduced on 4 December 2012 with most
of its provisions having to be implemented by Member States by 5 June 2014. The
Directive establishes a common framework of measures for the promotion of energy
efficiency within the EU in order to ensure the achievement of the EU’s 2020 20 per
cent headline target on energy efficiency and to pave the way for further energy
efficiency improvements beyond that date. All EU-28 countries are required to use
energy more efficiently at all stages of the energy chain – from the transformation of
energy and its distribution to its final consumption. The new Directive will help remove
barriers and overcome market failures that impede efficiency in the supply and use of
energy and provides for the establishment of indicative national energy efficiency
targets for 2020.

In September 2012 seven cities across England were awarded a share of £12m by the
Government to help them kick-start the Green Deal in their regions. The cities -
Birmingham, Bristol, Leeds, Manchester, Newcastle, Nottingham and Sheffield - put
forward ambitious proposals to lower their carbon emissions and this funding will
support their plans to test key elements of the Green Deal.

The secondary legislation underpinning the Green Deal and Energy Company
Obligation was laid in Parliament in June 2012. Alongside this, DECC is publishing
supporting guidance for participants in the Green Deal, such as a Code of Practice.
2012 (continued) The legislation will begin to take effect over the summer, with the Energy Company
Obligation in operation from October 2012. DECC has confirmed the Green Deal will
be introduced through a controlled approach from October with full national systems
testing to ensure consumer quality standards are embedded from the start.

Energy Policy
In November 2012, the Government introduced a package of energy measures, setting
a clear and comprehensive framework for energy policy combined with substantial
clarity on much of the detail investors need to continue investing in the UK’s energy
infrastructure.

The Energy Bill was introduced in Parliament, alongside a series of other key
documents including the Annual Energy Statement, the Energy Security Strategy and a
consultation on electricity demand reduction.

The Energy Bill will establish a legislative framework for delivering secure, affordable
and low carbon electricity. It will put in place measures to attract the investment which
is needed to replace current generating capacity and rising demand for electricity. In
addition, the Bill contains measures to reform the electricity market to deliver secure,
clean and affordable electricity, including:

• Contracts for Difference (CfDs) will stabilise revenues for investors in low-
carbon electricity generation projects helping developers secure the large
upfront capital investment required for low carbon infrastructure while
protecting consumers from rising energy bills;

• A new company to be established to act as a single counterparty to the CfDs


with eligible generators;

• Powers to introduce a Capacity Market, allowing for capacity auctions from


2014 for delivery of capacity in the winter of 2018/19, if needed, to help ensure
the lights stay on even at times of peak demand;

An Emissions Performance Standard (EPS) which will curb the most polluting fossil
fuel power stations.

In November 2012, the Government published the Energy Efficiency Strategy. The
Strategy is aimed at changing the way energy is used in sectors such as housing,
transport and manufacturing over the coming decades. It also includes immediate
action to kick start a revolution in UK energy efficiency, including:

• £39 million to fund five centres examining business and household energy
demand.

• An energy efficiency labelling trial with John Lewis.

• A drive on financing energy efficiency for business and the public sector.
2012 (continued) In September 2012 the Government set out measures to help ensure that energy
consumers are treated fairly and to make it easier for households get a better deal for
their gas and electricity, including:

• New powers for Ofgem. Ofgem will be able to require companies who have
breached licence conditions to compensate consumers who have lost out
directly, rather than necessarily having to rely on a voluntary approach.
Consumers will benefit directly instead of fines just going to the Treasury. The
Government has already strengthened Ofgem’s hand by making it harder for
energy companies to block licence changes, and introducing tougher rules on
the information suppliers have to provide to their customers.

• Help for prepayment meter customers in debt. The Government wants energy
consumers wherever possible to be able to choose the best energy tariff for
them. At the moment, prepayment meter customers who are more than £200
in debt to their energy supplier cannot switch to another company - which
means they could be missing out cheaper deals elsewhere. Following a review
by Ofgem, a voluntary agreement with suppliers means that this threshold will
be raised to £500. From 1 November tens of thousands more households will
be able to shop around for a better tariff and switch if they find a cheaper deal.

• Collective Switching Competition – a scheme where people can club together


to get a better deal on their energy. ‘Collective purchasing and switching’ as it
is known has the potential to help the most vulnerable households to save. A
£5m competition for the most innovative local authority or third sector schemes
is to be launched.

• Better billing. Energy bills are rising, but fewer people than ever seem to be
shopping around and switching to a better deal. The Government is working
with Ofgem to ensure that consumers have clear information on their bills
about the supplier’s cheapest tariff and the savings consumers could make by
switching. The Government is also working with suppliers to get better
information for consumers, including the possibility of putting Quick Response
(QR) codes on energy bills/annual statements to make it possible to switch
through mobile phones.

• An independent suppliers summit. 99 per cent of domestic households are


customers of only six main energy suppliers. The Government wants to see
more competition in the market, with companies working harder to win and
then keep consumers’ business. Building on the work the Government has
already carried out to reduce barriers to entry and growth, a summit with
independent suppliers will explore what more can be done.

A new Energy Bill was announced in the Queen’s speech in May 2012. The purpose of
the Bill is to reform the electricity market to enable large-scale investment in low-
carbon generation capacity in the UK and deliver security of supply, in a cost-effective
way.

Feed in Tariffs
At the start of April 2012, changes were made to the feed in tariffs for small scale solar
PV installations. This followed a consultation process and subsequent legal challenges.

Further changes, following a consultation process, to solar PV tariffs and a PV tariff


degression mechanism, came into effect in August 2012, whilst further tariff changes
and degression for all other technologies as well as scheme administration issues
came into effect in December 2012.
2012 (continued) Fuel Poverty
A new way to measure fuel poverty in England was proposed by the Government in
September 2012, following the independent review on this issue by Professor John
Hills of the London School of Economics (LSE).

The proposal is to adopt a new definition based on the overall framework suggested by
Hills in his review. The new definition includes dual indicators separating the extent of
the issue (the number of people affected) from its depth (how badly people are
affected) as a way to measure the problem.

Ensuring more accurate measurement will help to design effective solutions to fuel
poverty, allowing the resources available to be targeted where they are needed most.

The Government is currently considering the responses to this consultation.

An independent report, by Professor John Hills of the London School of Economics,


was published in March 2012, which advised the government how it could best tackle
the problem of fuel poverty. Professor Hills started his research in March 2011 and
looked at the definition of fuel poverty, targets, and the effectiveness of different policy
interventions. Recommendations included in the report are:

• Professor Hills is clear that fuel poverty is currently measured in a way that is
both flawed and unhelpful;

• Professor Hills has proposed a new way to define fuel poverty, separating the
extent of the issue (the number of people affected) from its depth (how badly
people are affected);

Professor Hills also shows how the impact of Government policies can be assessed
against this new proposed definition, showing the positive impact current Government
policies are having on tackling fuel poverty

Oil and Gas


In December 2012, the Government announced that exploratory hydraulic fracturing
(fracking) for shale gas could resume in the UK, subject to new controls to mitigate the
risks of seismic activity.

In December 2012, the Government confirmed gas will continue to play an important
role in the energy supply mix. The Gas Generation Strategy sets out a number of steps
that will be taken to stimulate investment in gas generation. New gas-fired power
stations (which emit half the CO2 of coal) will need to be built over the next two
decades to replace retiring coal, older gas and nuclear power stations. The Strategy
also confirms the Government’s commitment to supporting the development and
commercialisation of Carbon Capture and Storage (CCS) technology, which will help to
decarbonise gas, as well as coal, in future.

In November 2012 the Government gave Chevron North Sea Ltd consent to drill the
deepwater Cambo-5 well, West of the Shetland Isles.

In October 2012 the Government gave Shell consent for a new oil and gas
development that will add two per cent to UK daily production. The Fram field, off the
East Coast of Scotland, is one of the biggest developments to be given the go ahead in
the past five years. Once production starts, the field is expected to recover an average
of 35,000 barrels of oil equivalent per day.

In May 2012 it was announced that the Coryton refinery would close due to the
refinery's administrators having failed to find a buyer. The refinery will now be turned
into a diesel import terminal by Vopak, Shell and Greenergy; initially it will have a
capacity of 500,000 cubic metres (18,000,000 cu ft).
2012 (continued) In May 2012, Total announced that the gas leak from the Elgin platform that started on
the 25th March 2012 had been stopped. A dynamic kill operation successfully used
heavy mud to stem the flow of gas from the gas well.

In May 2012, the Government announced that the latest North Sea licensing round for
oil and gas drilling has broken all previous records for the number of applications
received by the Government. A total of 224 applications were submitted for the 27th
Licensing Round covering 418 blocks of the UK Continental Shelf. It is the largest
number since offshore licensing began in 1964 and is 37 more than the previous high
total received in the last licensing round.

In March 2012, the Government gave BP consent to drill the deepwater North Uist well,
northwest of the Shetland Islands.

Renewable Heat
In March 2012 the Government announced further support for the domestic sector
under a second phase of the Renewable Heat Premium Payment Scheme (RHPP).

Renewables
In October 2012, the Government gave consent to a new 19 turbine/57 MW wind farm
near Frodsham, Cheshire with the potential to generate enough power to supply the
equivalent of 25,000 homes.

In October 2012, the Government gave consent to the construction of a 60MW energy
from waste generating station at Lostock in Cheshire, which will generate enough
power to supply 80,000 homes.

Smart Meters
In April 2012, the Government published its responses to consultations on the licence
conditions and technical specifications for the roll-out of gas and electricity smart
metering equipment, and on licence conditions for a code of practice for the installation
of smart meters. At the same time, it published consultations on a consumer
engagement strategy, data access and privacy, the Smart Energy Code, and elements
of the regulatory framework for the Data and Communications Company. It also
published its conclusions relating to the Smart Metering Equipment Technical
Specifications and notified these to the European Commission, as required under the
Technical Standards Directive.
2011 Carbon Capture and Storage
At a meeting in April 2011 in the United Arab Emirates, Energy Ministers from around
the world agreed to proposals to help speed up the global deployment of carbon
capture and storage. The proposals include:

• Advance policies that address the financial gap and risks associated with
early-mover carbon capture and storage (CCS) projects;

• Identify and advance appropriate funding mechanisms to support the


demonstration of large-scale CCS projects in developing economies;

• Advance the development of legal and regulatory frameworks for CCS;

• Promote the importance to global CCS deployment of ratifying key


international marine treaty amendments;

• Support and encourage the development of best practice knowledge-sharing


from early mover projects, in particular those with public funding;

• Review key gaps in storage data coverage and knowledge including capacity
assessment; and

• Recognise the potential of CCS for industrial emission sources and review
demonstration opportunities.

Climate Change
The United Nations climate conference in Durban took place from 28 November to the
11 December 2011. In the end, the talks resulted in:

• the adoption of a roadmap – the ‘Durban Platform’ – to a global legally binding


agreement applicable to all countries.

• recognition that there is a global gap in ambition between existing emissions


reduction pledges for the period to 2020 and the minimum necessary to stay
below a global temperature increase of 2°C.

• agreement to adopt, next year, the second commitment period of the Kyoto
Protocol.

• Operationalisation of the Green Climate Fund to support mitigation and


adaptation policies and activities in developing countries, following a
successful process over the last year of designing its structure and operation.

• establishment of a work programme to look at sources of long-term finance for


developing countries (including, but not limited to, the Green Climate Fund),
with the aim of mobilising at least $100 billion per year by 2020.
2011 (continued) In December 2011, the Government published the Carbon Plan, which sets out plans
to meet the fourth carbon budget and which shows how doing so puts the UK on a
plausible pathway to 2050. The Plan sets out plans to halve emissions (from 1990) in
the fourth carbon budget period of 2022 to 2027 by:

• insulating all cavity walls and lofts, where practicable, and up to 1.5 million
solid wall insulations by 2020.

• insulating a further 1-3.7 million solid walls by 2030.

• completing 100,000 low carbon heat installations by 2020 and up to 8.6 million
by 2030 as natural gas heating is phased out by 2050.

• building between 40 and 70 GW of low-carbon electricity capacity by 2030, on


the path to 90 and 140 GW in 2050.

• reducing average new car emissions from 144gCO2/km to between 50 and


70g CO2/km in 2030, on the path to decarbonising road transport by 2050.

A fourth carbon budget of 1950 MtCO2e for the period that will span from 2023 to
2027, putting the UK on course to cut emissions by at least 80% by 2050, was
announced by the Government in May 2011. The carbon budget will place the British
economy at the leading edge of a new global industrial transformation, and ensure low
carbon energy security and decarbonisation is achieved at least cost to the consumer.

Electricity
In December 2011, Tilbury B, a 1,062MW coal fired plant was converted to a 742MW
biomass plant, to become the largest biomass burning power generating facility in the
world.

In December 2011, the Government gave consent to Dalkia for a new waste wood
biomass power station in Yorkshire. The 53MW power station at the former RAF
airfield at Pollington will be fuelled by 360,000 tonnes of waste wood per annum,
powering around 55,000 homes per year.

In October 2011, the government published a consultation on feed in tariffs, detailing a


number of proposals.

In October 2011, the Government gave approval for two new power stations in
Yorkshire that will generate enough energy to power almost two million homes. The
plants are Ferrybridge, a 108 MW Multifuel (biomass and energy from waste) power
plant in Wakefield, and Thorpe Marsh, a 1,500 MW Combined Cycle Gas Turbine
power plant in North Doncaster.

In September 2011, the Government gave approval to Anglesey Aluminium Metal


Renewables to construct a biomass fuelled power station at Penrhos Works, Holyhead,
Anglesey. When operational the plant will generate 299 MW of electricity, enough to
power approximately 300,000 homes – equivalent to around a quarter of the homes in
Wales.

In August 2011, the Government gave approval for InterGen’s proposals to construct a
new 900MW gas power plant at the London Gateway Logistics Park, Coryton, Essex.
The plant will consist of up to two CCGT generating units, each around 450MW in
capacity.

In August 2011, the Government gave approval for the construction of two new
biomass stations in Yorkshire and North Lincolnshire, which combined will produce
enough electricity to meet the needs of over a million homes. A 299MW biomass-
fuelled power station will be constructed on land at the existing 4000MW Drax Power
Station site in Selby, North Yorkshire, and a 299MW biomass-fuelled power station will
be built at South Killingholme near Immingham.
2011 (continued) In March 2011, the Government gave approval for RWE npower to build a 2400
megawatt gas power plant on the site of the former Willington A and B power stations
in South Derbyshire.

In February 2011, the Government gave approval for SSE to build a gas-fired power
station near Port Talbot. The Abernedd Combined Cycle Gas Turbine Plant will be built
at the Baglan Bay Energy Park, on the former site of a chemicals facility.

In January 2011, the Government gave approval for Scottish Power to construct a new
1,000 megawatt gas-fired power station near Hoo St Werburgh in Kent, adjacent to the
existing Damhead Creek 800 MW gas-fired power station.

Emissions Trading
In January 2011, 4.4 million allowances were auctioned in the sixteenth auction as part
of phase II of the EU ETS. In 2011, the UK plans to auction a total of 30.7 million
allowances.

Energy Policy
A consultation on the Green Deal was published in November 2011 as part of the
Energy and Climate Change Secretary’s Annual Energy Statement to Parliament. £14
billion worth of private sector investment in home energy improvements over the next
decade will help insulate households from rising global energy prices and create
thousands of jobs in the British insulation and construction sector. The Green Deal
framework will be launched from October 2012.

In July 2011, the Government published the Electricity Market Reform White Paper
which sets out key measures to attract investment, reduce the impact on consumer
bills, and create a secure mix of electricity sources including gas, new nuclear,
renewables and carbon capture and storage. The Renewables Roadmap published
alongside the White Paper outlines a plan of action to accelerate renewable energy
deployment – to meet the target of 15% of all energy by 2020 – while driving down
costs.

The Government published its finalised Energy National Policy Statements (NPSs) in
June 2011 in order for them to be debated in Parliament. The Energy NPSs provide a
clear framework for decision making and set out the need for a surge of investment in
new energy sources, including 33GW of new renewable energy capacity.

Ofgem announced in March 2011 new rules that mean energy suppliers must give
consumers at least 30 days advance notice before putting up their prices. The changes
come into effect on 28 April 2011.

Measures designed to hasten the speed and scale of investment in low carbon energy
projects as well as changes to oil and gas taxes were announced by the Chancellor of
the Exchequer in the March 2011 Budget. These include:

• Green Investment Bank – the initial capitalisation of the Bank will be £3 billion
and it will begin operation in 2012/13.

• Carbon price support – the Government is to introduce a floor to the carbon


price for electricity generation from April 2013, this will start at around £16 per
tonne of carbon dioxide and move to a target price of £30 per tonne in 2020.

• Oil and gas taxes – the rate of the supplementary charge levied on profits from
UK oil and gas production will increase to 32 per cent from midnight on 24
March 2011.

In March 2011, the Energy Bill was introduced into the House of Commons with its
First Reading. The Second Reading was heard on 10 May with Committee sessions
being held during June 2011.
2011 (continued) In March 2011, following a Call for Evidence, the Government revised aspects of the
2050 Calculator. Major changes include:

• Adding four new sectors to the 2050 Calculator, including the option to fit
carbon capture and storage technology to gas-fired power plants;

• Adding three additional scenarios for international shipping emissions;

• Amending some of the boundaries of the choices, for example reflecting a


higher capacity for the offshore wind level 4;

• Improving the five-day balancing ‘stress test’ and adding a short, sharp one-
day stress test.

The world’s first financial incentive of its kind to revolutionise the way heat is generated
and used in buildings was launched by the Government and opened for applications in
November 2011. The Renewable Heat Incentive (RHI) will support emerging
technologies and businesses in the UK, strengthening security of supply by reducing
dependence on fossil fuel heating and emissions.

Nuclear
The Nuclear National Policy Statement, published in June 2011, listed eight sites
across the country, Bradwell, Hartlepool, Heysham, Hinkley Point, Oldbury, Sellafield,
Sizewell, and Wylfa, as suitable for new nuclear power stations by 2025.

Oil and Gas


In October 2011, the Government gave consent to BP and its partners Shell,
ConocoPhillips and Chevron for their £4.5 billion Clair Ridge development west of the
Shetland Islands. The Clair Ridge project has the capability to produce an estimated
640 million barrels of oil and is planned to come on stream in 2016, extending the
production life of the greater Clair area to the year 2050.

In June 2011 the UK joined its partners in the International Energy Agency (IEA) in
releasing oil stocks to the market. A total of 60 million barrels of oil were made
available for purchase, with the UK contributing some three million barrels. The release
of stocks will help prevent short-term supply disruptions leading to volatile oil prices
that could damage the economy. At the end of June 2011 Brent crude oil prices stood
at $112 a barrel.

In January 2011 Brent crude oil prices topped $100 a barrel for the first time since
October 2008 following concerns about political unrest in Egypt; prices rose to over
$125 a barrel in April, the highest level for over two years, following continued unrest in
oil producing nations in North Africa and the Middle East.

Renewables
In August 2011, the Government launched a £3 million scheme to help install eco-
heaters in the homes of social housing tenants. Heating equipment including biomass
boilers, solar hot water panels and heat pumps will be available under the new
scheme. Registered Providers of social housing, such as local authorities and social
housing associations, will be able to bid for a share of the £3 million, part of the £15
million Renewable Heat Premium Payment budget, to make home heating
improvements to tenants’ homes.

The outcome of the Government’s fast track review on Feed-in Tariff (FIT) levels of
support for large scale solar and anaerobic digestion installations was announced in
June 2011. New tariffs for large scale and all stand-alone solar and farm-scale
anaerobic digestion will start from 1st August 2011 for new installations, whilst money
will be protected for householders, small businesses and communities and a range of
technologies ensuring scheme longevity.
2011 (continued) In February 2011, the Government gave permission for the construction of a 230MW
wind farm off the coast of Humberside. The Humber Gateway wind farm will generate
enough electricity to power up to around 150,000 homes.

Smart Meters
The Government published its plans for the national rollout of smart meters in March
2011. 53 million smart meters in 30 million homes and businesses will be installed
across Great Britain, with an estimated net benefit to the nation of £7.3 billion over the
next twenty years. The mass rollout will start in 2014, and will be completed in 2019.
2010 Carbon Capture and Storage
Funding was awarded by the Government in March 2010 to E.ON and Scottish Power
for design and development studies as part of the competition to build one of the
world’s first commercial scale carbon capture and storage demonstration plants. The
funding will support Front End Engineering and Design studies, which will enable the
companies to further their designs for the projects at Kingsnorth and Longannet
respectively.

Carbon Emissions Reduction Target


The Government announced in June 2010 that the CERT target will be extended from
March 2011 until December 2012 as well as placing new obligations on energy
companies to include:

• 68% of energy suppliers’ work will now have to be met through professionally
installed loft, cavity and solid wall insulation. With DIY insulation added, more
than 80% of the scheme will be focused on insulation. Previously just 60% was
met through professional and DIY work;

• 15% of homes helped will be the lowest income households more at risk of fuel
poverty;

• Energy companies will now be stopped from promoting compact fluorescent


lamps in order to prioritise insulation, further to the total ban on light bulb mail-
outs.

The changes to CERT will mean some 3.5 million more homes across Great Britain are
likely to benefit from insulation, building substantially on the 2.5 million homes treated
under the scheme since April 2008.

Climate Change
The United Nations Climate Change conference took place in Cancun, Mexico in
November/December 2010. Key outcomes from the agreements at the conference are:

• Objective: agreed to peak emissions and an overall 2 degree target to limit


temperature rise.

• Emissions: bringing details of what developed and developing countries are


doing to tackle climate change, promised in Copenhagen, into the UN system
so they can be assessed.

• MRV: agreed a system so we know how countries are living up to their


promises to take action on emissions

• Long-term finance: established the Green Climate Fund and will start to get it
ready to help developing countries go low carbon and adapt to climate
impacts.

• Deforestation: agreed to slow, halt and reverse destruction of trees and agree
the rules for delivering it and for monitoring progress.

• Technology/Adaptation: set up the mechanisms to help developing countries


access low carbon technology, and adapt to climate change.
2010 (continued) Electricity
In December 2010 the Government launched consultations on fundamental reforms to
the electricity market to ensure the UK can meet its climate goals and have a secure,
affordable supply of electricity in the long term. The key proposals include:

• Four reforms to provide long-term certainty for electricity investors.

• A new market to have built-in level playing field for low carbon.

• Rules for existing investments protected.

• Long term impact on household electricity bills lower than under the current
market.

In November 2010, the Government gave approval for the construction of a 900 MW
Combined Cycle Gas Turbine (CCGT) power station at West Marsh Road, Spalding,
Lincolnshire.

The Government gave consent, in April 2010, for the construction of a 1,520 MW
Combined Cycle Gas Turbine (CCGT) power plant in Carrington, Greater Manchester.

Emissions Trading
In January 2010, 4.9 million allowances were auctioned in the eighth auction as part of
phase II of the EU ETS. In 2010, the UK plans to auction a total of 35.8 million
allowances.

Energy Policy
In December 2010 the Energy Bill 2010, announced in the Queen's Speech in May
2010, was published. The Bill has three principal objectives: tackling barriers to
investment in energy efficiency; enhancing energy security; and enabling investment in
low carbon energy supplies.

In October 2010 it was announced that the Department of Energy and Climate Change
will, over the course of the Spending Review period (2011-2015), reduce resource
spending by 18% in real terms, and increase capital spending by 41% in real terms.
The Department’s administration budget will be reduced by 33%.

In the first ever Annual Energy Statement to Parliament in July 2010, the Energy and
Climate Change Secretary set out 32 actions being taken to accelerate the
transformation of the energy system and wider economy in 4 key areas:

• Saving energy through the Green Deal and supporting vulnerable consumers

• Delivering secure energy on the way to a low carbon energy future

• Managing the UK energy legacy responsibly and cost-effectively

• Driving ambitious action on climate change at home and abroad

Published alongside the Statement was a groundbreaking ‘2050’ analysis, which


included 6 illustrative ‘pathways’ showing that meeting the target of an 80% cut in
emissions by 2050 is ambitious but achievable, and compatible with maintaining
security of energy supplies. An online ‘2050 Calculator’ was also launched, enabling
the public to explore the trade-offs inherent in designing the future secure, low carbon
energy system and wider economy.
2010 (continued) Major low carbon components of the Budget announced by the Chancellor in June
2010 include:
• An assessment of how the energy tax framework can provide the right
incentives for investment, alongside wider market reforms.

• Detailed proposals on the creation of a Green Investment Bank, following the


Spending Review, to help the UK meet the low-carbon investment challenge.

• Establishing a Green Deal for households through legislation in the Energy


Security and Green Economy Bill, to help individuals invest in home energy
efficiency improvements that can pay for themselves from the savings in
energy bills.

• Making the tax system fairer by examining options for the design of a fair fuel
stabiliser; considering the case for introducing a fuel duty discount in remote
rural areas; and exploring changes to the aviation tax system.

The Energy Bill received Royal Assent in April 2010, becoming the Energy Act 2010.
The main elements of the new Act are:
• Carbon capture and storage (CCS) – delivering a new financial incentive to
bring forward four commercial scale demonstration projects on coal-fired
power stations and to support the retrofit of additional CCS capacity to those
projects should it be required at a later date.

• Mandatory social price support – creating a framework to mandate energy


companies to provide support to the fuel poor, including powers to give greater
guidance and direction on the types of households eligible for future support
and the type of support they should be given.

• Clarifying Ofgem’s remit – making it clear that Ofgem must: include the
reduction of carbon emissions and the delivery of secure energy supplies in
their assessment of the interests of consumers, and step in proactively to
protect consumers as well as considering longer term actions to promote
competition.

• Tackling market power exploitation – giving Ofgem additional powers to tackle


market exploitation where companies might take advantage of constraints in
the electricity transmission grid.
2010 (continued) Major low carbon components of the Budget announced by the Chancellor in March
2010 include:
• A new Green Investment Bank for Low Carbon Development to assist the
finance challenge confronting infrastructure projects in the UK.

• An offshore wind infrastructure competition for up to £60m of funds to develop


sites close to ports that will support manufacturing for the offshore wind
industry.

• Publication of the initial findings of the Energy Market Assessment, narrowing


down the options for market reform to incentivise the necessary investment
over the next few decades and to ensure the consumer gets the best deal
possible in the long term.

• Government and the financial services industry will undertake detailed work
through a joint forum to develop Pay As You Save arrangements. This will
enable millions of households to finance the high upfront costs of installations
from the savings they make on their energy bills.

• A consultation on proposals to change the way in which electricity from


biomass is supported to improve investor certainty and ensure sustainability.

• Government intends to opt nitrous oxide gases from nitric acid production into
the EU ETS from 2011.

The Government launched in January 2010 a national scheme to upgrade household


heating systems to cut carbon, save money on fuel bills and sustain work for the
heating industry. Up to 125,000 households in England with working “G-rated” boilers
can apply through the Energy Saving Trust for a voucher which will entitle them to
£400 off the price of a new, modern “A-rated” boiler or a renewable heating system like
a biomass boiler or a heat pump.

Oil and Gas


In October 2010 the Government issued a gas storage licence for ENI’s proposed
major new gas storage facility at the Deborah field, under the Southern North Sea near
the Bacton terminal, if established the facility will become the first large scale UK
depleted offshore field to be used as a gas storage facility in 27 years.

In September 2010, the Government gave approval for WINGAS Storage to convert its
Saltfleetby onshore gas field into an underground gas storage facility. As a result the
UK’s gas storage capacity is set to rise by 15 per cent with Saltfleetby in Lincolnshire,
the UK’s largest onshore gas field, providing between 700 million to 800 million cubic
metres of new gas storage capacity.

In June 2010, the Government approved the development of the Bacchus oil and gas
field located in the Central North Sea, which has estimated reserves of 18 million
barrels of oil equivalent.

In June 2010 the Government announced record levels of interest in new


developments in the North Sea. 356 blocks were applied for in the latest licensing
round, the largest number of blocks applied for since the first licensing round was
launched in 1964.

In April 2010, South Hook, Europe's largest Liquefied Natural Gas (LNG) Terminal, at
Milford Haven in South West Wales, successfully completed the build and
commissioning of phase 2 and is now complete. The terminal has a total processing
capacity of 15.6 million tonnes per annum of LNG and is capable of delivering up to 21
billion cubic metres per annum of gas into the National Transmission System (NTS).
2010 (continued) The Government gave consent, in March 2010, for Total and Dong Energy to develop
the Laggan and Tormore gas fields, which lie in 600 metres of water and in one of the
most hostile environments in the UK. These will be the first gas fields to be developed
in UK waters at this depth and will produce more than 1 trillion cubic feet of gas in the
course of the field’s life.

The Government issued, in February 2010, the first licence under the Energy Act 2008
to encourage the construction of more gas storage which could see the UK’s gas
storage capacity increase by 30%. The Gateway Project, located in the east Irish Sea,
will create twenty new salt caverns each the size of the Albert Hall.

A new round of offshore licensing was announced in January 2010. The 26th offshore
licensing round will allow for oil and gas exploration in UK waters; for the first time
since 1998, this round offers blocks in all areas of the UK seas for new licensing. The
blocks offered include a number relinquished under the Government and industry’s
'Fallow Initiative', which stimulates activity on blocks where there had been no
significant activity for three years.

Renewables
In November 2010, the Government gave approval for a 56MW onshore wind farm on
the Ray Estate near Kirkwhelpington, Northumberland.

The world’s largest wind farm off the south coast of England was officially opened in
September 2010. The Thanet Offshore Windfarm will generate enough electricity to
power 200,000 homes. It increases the UK’s output by a third and means that the UK
now generates more offshore wind than the rest of the world put together.

In April 2010, the Government launched the Feed in tariffs (FITs) scheme, which will
allow individuals, organisations or businesses in England, Wales and Scotland who
install low carbon electricity generation to be paid for any electricity they generate
themselves from low carbon sources and benefit from a cheaper electricity bill.

The Government, in March 2010, gave approval to the construction of a new 100 MW
power plant fuelled by biomass at Bristol Port, Avonmouth.

In January 2010 The Crown Estate, owner of the UK’s coastal seabeds, granted rights
to energy companies to develop wind energy. The announcement has the potential to
see an additional 32GW of wind generation into the UK grid, on top of 8GW from
previous rounds, and will mean an extra 6,400 turbines.
2009 Carbon Capture and Storage
Alongside the six draft National Policy Statements laid before Parliament in November
2009 by the Secretary of State for Energy and Climate Change, a Framework for the
Development of Clean Coal was also published which confirmed that with immediate
effect, to gain development consent all new coal plant will have to show that they will
demonstrate the full CCS chain (capture, transport and storage) from the outset on at
least 300 MW net of their total output.

The Secretary of State for Energy and Climate Change announced in a statement to
Parliament in April 2009 a new generation of coal-fired power stations equipped for
carbon capture and storage, of which up to four such plants could be built by 2020.

Carbon Emissions Reduction Target


The Government announced in June 2009 that more help to save energy will be
available to householders due to an increase in the Carbon Emissions Reduction
Target (CERT) scheme and the introduction of a new Community Energy Saving
Programme (CESP). Together, CERT and CESP will see extra investment by energy
companies under the two schemes, taking the total to an estimated £3.5billion in
energy efficiency improvements by the end of 2012.

The Government published in February 2009 a consultation on proposals to amend


the Carbon Emissions Reduction Target (CERT) through the Electricity and Gas
(Carbon Emissions Reduction) Order 2008. This supports a key element of the Prime
Minister’s £1 billion Home Energy Saving Programme announced in September 2008.

Climate Change
The move towards global and immediate action on climate change was agreed as part
of the Copenhagen Accord, in December 2009. The Accord – agreed by major
developed and developing country leaders and backed by a large majority of countries
- will reinforce the need for strong domestic action on climate change across the world.
The Accord includes international backing for an overall limit of 2 degrees on global
warming; agreement that all countries need to take action on climate change; and the
provision of immediate and longer term financial help to those countries most at risk of
climate change.

The Secretary of State for Energy and Climate Change announced in September 2009
new measures to help householders save money and energy following the launch of
10:10 – a new independent campaign to cut carbon emissions by 10% in 2010.

In September 2009, the Government launched a search for local authorities, charities
and social enterprises to take up the challenge to help communities fight climate
change. Communities will be able to apply for a share of a £10million fund as part of
the Low Carbon Communities Challenge to build on existing low carbon schemes.
2009 (continued) The Chancellor announced the UK's first three 'carbon budgets' alongside his fiscal
Budget in April 2009, and also set out new measures designed to help low carbon
industries capitalise on the opportunities presented by the UK's legally binding target to
cut greenhouse gas emissions to at least 80% below 1990 levels by 2050. The new
measures include:

• Legally binding carbon budgets for the first three five-year periods
2008-2012, 2013-2017 and 2018-2022.

• A revised target to reduce emissions to at least 34% below 1990 emissions by


2018-22.

• Aim to meet the carbon budgets announced through domestic action alone,
and consistent with this, setting a zero limit in the non- traded sector on
offsetting through international credits for the first budget period.

• Commitment to tighten the budget after Copenhagen in December


2009, once we have a global climate change agreement.

Electricity
A new 95 Mega Watt power plant capable of turning 600,000 tonnes of waste each
year into electricity and heat, to be built at Ince in Cheshire, was approved by the
Government in August 2009. The waste, which would have otherwise gone to landfill,
will instead be used to generate electricity to power a new Resource Recovery Park.
Excess electricity will also be exported to the National Grid.

The Government granted consent in February 2009 for three new power stations
capable of providing approximately four million homes with electricity to be constructed
at Pembroke, King’s Lynn and Hatfield. The new gas fired power stations will produce
around 4 gigawatts of power.

Emissions Trading
The Government announced in February 2009 that it intends to auction four million
allowances in its second auction as part of the EU ETS. In 2009 the UK plans to
auction a total of 25 million allowances.

Energy Policy
A new Energy Bill was introduced into Parliament in November 2009 by the
Government. New powers and clearer legislation will provide support for energy
consumers, giving a greater amount of help to the poorest and most vulnerable, as
well as introducing a new financial incentive for carbon capture and storage.

Faster and fairer planning decisions on new energy infrastructure were laid before
Parliament in November 2009 by the Secretary of State for Energy and Climate
Change. Six draft National Policy Statements - one overarching and one for each of
the following areas: fossil fuels, nuclear, renewables, transmission networks and oil
and gas pipelines – will guide planning decisions on energy infrastructure from March
2010 by the Infrastructure Planning Commission.
2009 (continued) A comprehensive plan to move the UK onto a permanent low carbon footing and to
maximise economic opportunities, growth and jobs was published by the Government
in July 2009. The UK Low Carbon Transition Plan sets out how by 2020:

• More than 1.2 million people will be in green jobs;

• 7 million homes will have benefited from whole house makeovers, and more
than 1.5 million households will be supported to produce their own clean
energy;

• 40% of electricity will be from low carbon sources, from renewables,


nuclear and clean coal;

• The UK will be importing half the amount of gas that we otherwise would;

• The average new car will emit 40% less carbon than now.

In February 2009 the Department of Energy and Climate Change, together with the
Department for Communities and Local Government, published three consultation
documents: the Heat and Energy Saving Strategy (HESS), the Carbon Emissions
Reduction Target uplift (CERT) and the Community Energy Saving Programme
(CESP). These home energy efficiency measures make up a comprehensive package
to save people energy and reduce emissions from now through to 2020 and beyond.

Fuel Poverty
The Government published its UK Fuel Poverty Strategy Seventh Annual Progress
Report in October 2009, reporting on the progress made since the last report,
highlighting key areas for attention during the coming year, and setting out the fuel
poverty figures for 2007. Alongside the report the Government set out four next steps
to help low income homes deal with high energy bills:

• Action to help the poorest insulate their homes.

• Provision of street by street help in low income neighbourhoods.

• Action on prices for the most vulnerable.

• Tougher regulation to make sure all consumers get a fair deal.

In April 2009, following a review, it was announced that the Warm Front Scheme had
been changed to improve the quality of service for its customers. Households
connected to the gas grid are now eligible for grants of up to £3500, up from £2700,
while those in areas off the gas grid can apply for funding up to £6000, an increase of
£2000.

Nuclear
In the draft nuclear National Policy Statement laid before Parliament in November
2009 by the Secretary of State for Energy and Climate Change, the Government
confirmed that all of the sites, with the exception of Dungeness, nominated by industry
have been assessed as potentially suitable for new nuclear deployment by the end of
2025.

A third potential new nuclear operator entered the UK market in October 2009 taking
total proposals for new nuclear power stations up to 16 gigawatts of electricity. A
consortium of GDF SUEZ SA, Iberdrola SA and Scottish and Southern Energy Plc
have secured an option to purchase land for the development of a new nuclear power
station at Sellafield.

A list of eleven sites that could be potential hosts to new nuclear power stations in the
UK, and be operational by 2025, was published in April 2009.
2009 (continued) In January 2009, EDF’s £12.5 billion purchase of British Energy Group plc (British
Energy) was completed. The purchase is a significant step in EDF's plans to build four
new nuclear reactors in the UK. The sale, which includes the 36 per cent stake in the
company held by the Government’s Nuclear Liabilities Fund, raises approximately £4.4
billion towards the cost of decommissioning British Energy’s existing nuclear power
stations.

Oil and Gas


In May 2009 the South Hook LNG re-gasification terminal, the largest LNG terminal in
Europe, was officially opened, following earlier arrival of commissioning cargoes.

A proposed new licensing scheme which will open up an area of up to 200 miles
around the UK for offshore gas storage and importation projects was announced in a
consultation document published in February 2009. The scheme will create a
regulatory environment that will encourage investment in new gas supply
infrastructure, including gas storage.

Renewables
At an Energy Council meeting in Brussels in December 2009, the Government signed
an agreement along with Germany, France, Belgium, the Netherlands, Luxembourg,
Denmark, Sweden and Ireland to develop an integrated offshore wind grid in the North
and Irish Seas.

In November 2009 the Government gave approval for the construction of a 80MW
energy from waste and biomass fuelled power station at Storey’s Bar Gate in
Peterborough.

In August 2009 the Government gave approval for a new 60 Mega Watt power plant,
fuelled by biomass and waste, to be built on a disused site at Tilbury Docks in Essex.

The Secretary of State for Energy and Climate Change announced in July 2009 that
three UK-based banks, RBS, Lloyds and BNP Paribas Fortis, will start work with the
European Investment Bank (EIB) on a programme to lend up to £1 billion to onshore
wind farms over the next 3 years. The cash will help get building started for onshore
wind projects which have been hit by the credit crunch, particularly small and mid-
sized wind farms.

In July 2009 the Government published, alongside the UK Low Carbon Transition
Plan, the Renewable Energy Strategy which maps out how the UK will deliver its target
of getting 15% of all energy (electricity, heat and transport) from renewables by 2020.

In May 2009 E.ON, Dong and Masdar announced the go ahead of the first phase of the
London Array offshore windfarm. The 1 Gigawatt London Array, to be situated off Kent
and Essex, will be the biggest offshore wind farm in the world, generating enough
electricity to power a quarter of Greater London’s homes, with the first power feeding
into the grid by 2012.

Smart Meters
In December 2009 the Government confirmed that smart meters will be rolled out
through energy suppliers to every home by the end of 2020, alongside a paper setting
out the case for developing smart grids in the UK.

All homes in Britain will have smart meters installed by 2020 under plans published by
the Government in May 2009. Smart meters enable meter readings to be taken
remotely and together with a display device give householders real time information on
their energy use. The new information smart meters provide will help consumers to
see what energy they are using and how to save money on their bills.
2008 Energy Bill
The Energy Bill was published in January 2008 in tandem with the Nuclear White
Paper. The purpose of the Bill, alongside the Climate Change and Planning Bills, is to
update and strengthen the legislative framework so that it is appropriate for today’s
energy market and fit for the challenges to be faced on climate change and security of
supply. Key elements of the bill are:

• Create a regulatory framework to enable private sector investment in Carbon


Capture and Storage projects while also protecting the environment.

• Ensure adequate funding provision be made by potential developers of new


nuclear power stations to pay the full costs of decommissioning and their full
share of waste management costs.

• Strengthen and simplify the regulatory framework to give investors more clarity
and certainty, reducing costs and risks for private sector investment in offshore
gas supply projects such as offshore storage and liquefied natural gas
infrastructure.

• Strengthen the Renewables Obligation (RO) to drive greater and more rapid
development of renewables in the UK. Proposals include amending the RO to
give more support to new and emerging technologies such as offshore wind,
wave and tidal by banding the Obligation.

• Measures to be brought forward for offshore renewables decommissioning,


ensuring that companies have adequate decommissioning funds so that both
the tax payer and the offshore environment is protected.

Carbon Capture and Storage


The Government published, in June 2008, a consultation on the legislative framework
for Carbon Capture and Storage (CCS), including carbon capture readiness. The
consultation sets out the Government’s views on CCS as a ‘high potential’ carbon
abatement technology and asks for views on what more can be done to promote,
develop and deploy CCS in the UK, EU and globally.

Climate Change
In December 2008 the Committee on Climate Change published its inaugural report
‘Building a low-carbon economy - the UK's contribution to tackling climate change’. The
report contained the Committees recommendations on the 2050 emissions reduction
target and advised on the levels of the UK’s first three legally binding carbon budgets
for 2008-2022.

In December 2008 at a meeting of the European Council EU leaders agreed measures


to deliver a unilateral commitment to reduce greenhouse gas emissions by 20% by
2020 compared to 1990 levels.

In October 2008, the Government committed the UK to cutting greenhouse gas


emissions by 80% on 1990 levels by 2050 as a major contribution to a global deal on
climate change.

Coal
Tower Colliery, the last deep mine in Wales, closed in January 2008, thirteen years
after its workforce rescued it from the pit closure programme.

Electricity
The Government announced, in January 2008, its support for electricity generated from
geopressure through the Renewables Obligation scheme, which provides companies
using green energy sources with assistance in competing with fossil fuel generators.
2008 (continued) Emissions Trading
In November 2008, the Government held Europe's first carbon allowance auction in
Phase II (2008-2012) of the EU Emissions Trading Scheme (EU ETS). Four million
allowances were sold at a total value of £54m excluding VAT.

The proposals announced by the European Commission in January 2008 for tackling
climate change and delivering a low carbon economy in Europe put the EU Emissions
Trading Scheme at the heart of EU climate policy, including establishing an EU wide
central cap on emissions covered by the EU ETS to 2020 and beyond.

Energy Policy
The second Energy Markets Outlook report, published in December 2008, set out the
risks and drivers associated with future security of energy supply, including scenarios
for future security of supply of electricity and gas and the full range of other fuels.

Machinery of Government changes announced in October 2008 resulted in Energy


Policy being transferred from the Department for Business, Enterprise and Regulatory
Reform, and Climate Change Policy being transferred from the Department for
Environment, Food and Rural Affairs to the new Department of Energy and Climate
Change.

EU Energy Review
The European Commission’s proposals for tackling climate change and delivering a
low carbon economy in Europe were announced in January 2008. The proposals
implement the decisions agreed by EU Heads of State and Government at the 2007
Spring European Council. For the UK, the Commission’s proposals include:

• a reduction of 16 per cent in UK greenhouse gas emissions from sectors not


covered by the EU ETS by 2020 from 2005 levels;

• for 15 per cent of the energy consumed in the UK to come from renewable
sources by 2020;

• for 10 per cent of road transport fuels to come from renewable sources,
subject to them being produced in a sustainable way.

Fuel Poverty
Help for people struggling with high home energy bills was announced in November
2008 by the Chancellor in the Pre-Budget Report, with additional Warm Front funding
of £100 million, and £50 million of existing allocation to be spent a year sooner than
planned.

The Government published its UK Fuel Poverty Strategy Sixth Annual Progress Report
in October 2008, reporting on the progress made since the last report, highlighting key
areas for attention during the coming year, and setting out the fuel poverty figures for
2006. As part of the progress report, annexes were also produced on methodology,
detailed analyses of the fuel poor, fuel poverty monitoring and company schemes and
case studies.

In September 2008, the Government announced a new package of measures to help


people with their gas and electricity bills. The launch of the Home Energy Saving
Programme will offer energy efficiency and other measures to households in deprived
areas and will be funded by energy suppliers and electricity generators. Suppliers will
also fund a 20% expansion in CERT, and increase their collective spend on social
programmes to £225million over the next three years.

A raft of new measures was agreed at a Fuel Poverty Summit hosted by OFGEM in
May 2008 to help vulnerable consumers access the best available tariffs.

In April 2008, the six largest energy suppliers individually agreed to spend an extra
£225m over three years to help those squeezed by rising fuel bills, which could lift
100,000 households out of fuel poverty.
2008 (continued) Heat
In January 2008, following a commitment in the 2007 Energy White Paper, BERR
along with Defra and DCLG published the Heat Call for Evidence. The Call for
Evidence will play an important part in developing a strategy for heat given that half of
all UK’s CO2 emissions arise from the use of heat.

Nuclear
In September 2008 EDF announced that its proposed takeover offer for British Energy
included substantial investment to build four new reactors, two each at Hinckley Point
and Sizewell, with a total generating capacity of 6.4GW of electricity.

The Government published in July 2008 its Strategic Siting Assessment of where new
nuclear power stations could safely and securely be built across England and Wales.

In June 2008 the Secretary of State for Business, Enterprise and Regulatory Reform
announced the creation of a Nuclear Development Forum to provide regular
discussions between Government and industry, and an Office of Nuclear Development
to provide a single focus within Government on the development of new nuclear.

The Government’s response to its nuclear consultation, in the form of a White Paper,
was published alongside the Energy Bill in January 2008. Following the consultation,
the Government has now decided that it is in the public interest to allow private sector
energy companies to invest in new nuclear power stations. Building of new nuclear
power stations is expected to commence in 2013-2014 with operation commencing in
2017-2020.

Oil and Gas


171 new licences were offered, in November 2008, to 100 companies covering 257
blocks of the North Sea as part of the 25th offshore oil and gas licensing round.

Industrial action by oil workers at the Grangemouth refinery in April 2008 led to the
temporary closure of the Forties oil pipeline, which provides 30% of the UK's daily oil
output from the North Sea.

Brent crude oil prices topped $100 a barrel for the first time in March 2008, and rose to
over $140 a barrel in June and July.

A record breaking 2,297 blocks or part blocks in UK waters were offered, in February
2008, for exploration in the 25th Offshore Oil and Gas Licensing Round.

Renewables
In December 2008 at a meeting of the European Council EU leaders agreed a
commitment to 20% of all energy to come from renewable sources by 2020 (including a
10% target for the use of renewable fuels in transport).

The Chancellor announced in the Pre-Budget Report in November 2008 the extension
of the Renewables Obligation from its current end date of 2027 to at least 2037. The
extension will ensure that investors can plan with confidence for the future so that over
the next decade the market will continue to deliver the renewables projects that are
needed to achieve the 2020 target.

In October 2008 the UK overtook Denmark to become the world's number one for wind
farms built offshore, with 597MW fully constructed. The achievement was made
possible after building work finished at Centrica's Lynn and Inner Dowsing wind farms
near Skegness. Offshore wind farms now have the potential to power the equivalent of
around 300,000 UK homes.

The Government published, in June 2008, a consultation on the UK Renewable Energy


Strategy. The consultation puts forward a package of measures to drive up the use and
deployment of renewable energy as part of the UK goal to tackle climate change and
ensure security of supply and to enable the UK to meet its EU 2020 target.
2008 (continued) The Crown Estate launched, in June 2008, its round 3 leasing programme for the
delivery of up to 25 GW (gigawatts) of new offshore windfarm sites by 2020. The
announcement was made at the BWEA (British Wind Energy Association) conference
in central London.

The UK’s offshore renewable industry will benefit from measures, jointly announced by
the Government and Ofgem in January 2008, to connect at least £2 billion of
investment to the national grid. The investment will support the delivery of the
necessary infrastructure to connect 8 gigawatts of planned offshore wind generation.

Retail Prices
The Chancellor announced in November 2008 in the Pre-Budget Report that Ofgem
will publish quarterly reports over the coming year showing the relationship between
wholesale prices, estimated hedged wholesale costs and average retail prices for gas
and electricity. This will make it clearer when companies are passing the benefits of
downward price changes through to their consumers and will ensure transparency over
future price changes. The first report was published in February 2009.
2007 Energy Policy
The Planning Reform Bill was published in November 2007. The Bill will make the
planning system quicker, more transparent and easier for the public to become
involved in, and will reform the planning system for major infrastructure projects
including climate change and energy security. At a local level, the Bill and other
reforms published at the same time will allow people to install small-scale renewable
power sources such as solar panels and wind turbines without planning permission if
they do not affect their neighbours.

The Energy Markets Outlook report, published in October 2007, provides energy
market information on security of supply, looking forward over a fifteen-year time span.
The report is intended to help develop a shared understanding of the longer-term
outlook for energy supply and demand, and to help understand emerging risks that
could affect security of supply.

Machinery of Government changes announced in June 2007 resulted in Energy Policy


being transferred from the former Department of Trade and Industry to the new
Department for Business, Enterprise and Regulatory Reform.

Energy White paper


The 2007 Energy White Paper (EWP), ‘Meeting the Energy Challenge’ was published
in May 2007. The paper reiterated the Government’s commitment to the four key
energy policy goals. The EWP, in response to the twin challenges of climate change
and security of supply announced a strategy to deliver energy security and accelerate
the transition to a low carbon economy. The key elements of the strategy are:

• Establish an international framework to tackle climate change;

• Provide legally binding carbon targets for the whole UK economy,


progressively reducing emissions;

• Make further progress in achieving fully competitive and transparent


international markets;

• Encourage more energy saving through better information, incentives and


regulations;

• Provide more support for low carbon technologies; and

• Ensure the right conditions for investment, including improvements to the


planning system.

Carbon Capture and Storage


The launch of the competition to build one of the world’s first commercial-scale carbon
capture and storage (CCS) plants was among the measures set out in a major speech
on climate change given by the Prime Minister at a WWF event in November 2007.

The 2007 Energy White Paper provided further details of the competition to develop
the UK’s first commercial-scale demonstration of a Carbon Capture and Storage
(CCS) Plant. The CCS plant will be due to be operational early in the next decade.
This competition was announced in the 2007 Budget.

Carbon Reduction Commitment


The 2007 Energy White Paper outlined plans to introduce a mandatory cap and trade
scheme, a Carbon Reduction Commitment, which will apply to the largest non-energy
intensive public and private sector organisations.
2007 (continued) Climate Change
The Climate Change Bill was published in November 2007. The Bill sets out a
framework that will put Britain on the path to become a low-carbon economy, with
clear, legally binding targets to reduce carbon dioxide emissions by at least 60% by
2050, and 26 to 32% by 2020, against 1990 levels. As well as setting clear targets, the
Bill provides a pathway to achieve those reductions through a system of five-year
carbon budgets set fifteen years ahead.

The Government published the Energy Measures Report, Addressing Climate Change
and Fuel Poverty – energy measures information for Local Government, in September
2007. The report sets out the steps that local authorities can take to: improve energy
efficiency; increase the levels of microgeneration and low carbon technologies; reduce
greenhouse gas emissions; and reduce the number of households living in fuel
poverty.

In September 2007 the location of the Energy Technologies Institute (ETI), backed by
up to £550m of Government investment announced by the Chancellor in the 2006
Budget, was announced. The ETI, based in Loughborough, will bring more focus,
ambition and collaboration to the UK's energy, science and engineering drive. It will
have a potential budget of over £1bn.

The Government’s blueprint for tackling climate change was published in March 2007.
The draft bill, the first of its kind in any country, and accompanying strategy, set out a
framework for moving the UK to a low-carbon economy.

Electricity
In May 2007 National Grid and TenneT Holding announced plans to construct a
260km, 1,000 MW electricity interconnector “BritNed” between the Netherlands and
the UK. It is expected to be commissioned by late 2010.

Severe weather caused widespread damage to power lines in England and Wales,
with supplies to over 1.2m customers being affected in January 2007. The Electricity
industry performed well in restoring supply, with over 90% of interrupted supplies back
on within 24 hours.

Emissions Trading
The Government published the National Allocation Plan (NAP) in March 2007; the plan
includes a list of the allowances to be allocated to individual installations covered by
the EU ETS for each year in the second phase.

EU Energy Review
The Council of the European Union at its Spring meeting in March 2007 called on
Member States and EU institutions to pursue actions to develop a sustainable
integrated European climate and energy policy. These include increasing security of
supply; ensuring the competitiveness of European economies and the availability of
affordable energy, and promoting environmental sustainability and combating climate
change.

The European Commission published its Strategic Energy Review in January 2007,
outlining proposals for the development of the internal energy market in the European
Union. These include the greater unbundling of energy network businesses from other
activities, more effective regulation and greater transparency.

Fuel Poverty
The Government published its UK Fuel Poverty Strategy Fifth Annual Progress Report
in December 2007, reporting on the progress made since the last report, highlighting
key areas for attention during the coming year, and setting out the fuel poverty figures
for 2005. As part of the progress report, annexes were also produced on methodology,
detailed analyses of the fuel poor, fuel poverty monitoring and company schemes and
case studies.
2007 (continued) Measures worth £2.3bn over three years to tackle fuel poverty and home energy
efficiency, the Carbon Emissions Reduction Target (CERT), were laid in Parliament in
December 2007. The Government also announced an £800m three year grant for the
Warm Front Scheme, which could assist 400,000 of the poorest households in
England.

The 2007 Energy White Paper outlined a range of new policies which will see a further
200,000 households being taken out of fuel poverty by 2010. These included:
providing a benefit entitlement check to all households that require one; enabling the
sharing of benefit information; putting in place a cross-Government communications
campaign in time for next winter, and encouraging energy suppliers to do more.

Nuclear
In May 2007 alongside the Energy White Paper a consultation on the role of nuclear
power in a low carbon UK economy was launched. The consultation seeks views on
whether the private sector should be allowed to build new nuclear power stations.

In February 2007 the High Court in a judicial review decided that the consultation
process on new nuclear power that preceded the Energy Review Report had not been
adequate. The Government then decided that a new consultation on nuclear power
was required.

Oil and Gas


In October 2007 the Langeled pipeline to Easington in Yorkshire from the Ormen
Lange field in Norway, became connected directly to the British gas network.

The May 2007 Energy White Paper announced legislation to allow the storage of
natural gas under the seabed and unloading of Liquefied Natural Gas at sea.

A milestone was reached in March 2007 when three new fields were approved, taking
the total number of offshore oil and gas developments in the North Sea’s 40 years
history to 350.

The Excelerate project, a world first 'liquid gas' shipment on Teesside, with enough
power in one 20,000 tonne shipment to fuel 60,000 homes began operation in
February 2007.

The very large Buzzard field, one of the largest oil discoveries to be developed in
British waters in more than a decade, started production in January 2007.

Renewables
Harnessing the vast potential of the UK's island status entered a new phase in
December 2007 when the Government announced proposals to open up its seas to up
to 33GW (gigawatts) of offshore wind energy.

A major expansion of energy from renewable sources was among the measures set
out in a major speech on climate change given by the Prime Minister at a WWF event
in November 2007. It was announced that tidal lagoons and barrages below one
gigawatt capacity will receive extra support through the Renewables Obligation,
potentially benefiting lagoons proposed for Rhyl, Swansea Bay and elsewhere.

A new report, Essential role of renewables generation in achieving zero carbon homes,
published in November 2007, from the Renewables Advisory Board (RAB) which
advises Government on renewable energy issues, provided the first in depth analysis
of the role of on site energy generation in the delivery of the Government's policy of
ensuring that all new homes are zero carbon from 2016. Amongst it findings is the
conclusion that the policy could drive a market for onsite renewable worth £2.3 billion a
year from 2016.

The May 2007 Energy White Paper announced legislation to band the Renewables
Obligation to benefit offshore wind, wave, tidal and other emerging technologies.
2007 (continued) The Government announced the development of the licensing regime for would be
electricity transmission owners in the UK’s pioneering offshore wind energy sector in
March 2007. After a joint consultation the DTI decided in agreement with Ofgem that
Britain’s monopoly electricity transmission network owners will have the opportunity to
compete against a wider range of transmission companies to build, own and maintain
the links.

The opening of the Braes and Doune wind farm in February 2007 took the UK’s wind
generation capacity above 2 GW, making the UK one of only 8 countries in the world
to have achieved this level.

Sustainable Energy Policy


The Fourth Annual Report on progress towards the 2003 Energy White Paper goals
was published in May 2007, reviewing progress made over the last 12 months.
Published as a supplement to the Fourth Annual Report, UK Energy Sector Indicators
was also published in May 2007.
2006 Sustainable Energy Policy
On 16th February 2006 the Government issued a consultation paper on carbon dioxide
emissions projections for industrial sectors covered by the EU Emissions Trading
Scheme. These projections are being used as an input to the development of the UK
National Allocation Plan for Phase II of the scheme, informing the allocation of carbon
dioxide allowances to installations in the 2008-12 period. The consultation closes on
April 13th.

The Third Annual Report to the Energy White Paper was published in May 2006,
reviewing progress made over the last 12 months towards the targets and strategy for
energy policy until 2050. Published as a supplement to the Third Annual Report,
Energy Sector Indicators 2006 was also published in May 2006.

Energy Review
The Energy Review Report “The Energy Challenge” detailing what needs to be done to
stay on track to meeting the goals in the 2003 Energy White Paper was published in
July 2006. The Report outlined proposals designed to reduce demand, secure a mix of
clean, low-carbon sources, and streamline the planning process for energy projects.

The 12 week consultation period for the energy review ended on the 12 April 2006 with
over 5,300 responses from individuals, businesses, academics and NGOs.

Climate Change
The Office of Climate Change (OCC) was established in October 2006. It is a shared
resource across Government established with the aim of ensuring that analysis and
policy work is consistent and supports the overall climate change strategy.

The Stern Review of economics of climate change was published in October 2006 and
confirmed that climate change is real and is a problem that can only be solved by
collective international action. The Review demonstrated that urgent action is needed
to mitigate the effects of climate change and that the costs of global action to mitigate
the most dangerous effects of climate change are significant but manageable, as long
as action is taken multilaterally.

An ambitious programme to tackle climate change domestically and to secure


agreement on action to reduce global greenhouse gas emissions was published by the
Government on 28 March 2006. The Programme is expected to reduce the UK’s
emissions of greenhouse gases to 23-25 per cent below base year levels and reduce
the UK’s carbon dioxide emissions to 15-18 per cent below 1990 levels by 2010.

Fuel Poverty
The Government published its UK Fuel Poverty Strategy Fourth Annual Report in June
2006, reporting on the progress made since the last year’s report, and setting out the
fuel poverty figures for 2004. Also published were a series of annexes, setting out the
detailed profile of the fuel poor, as well as outlining the many activities in which energy
companies are involved to tackle fuel poverty and associated problems. In the report,
we also responded to the recommendations made by The Fuel Poverty Advisory
Group in its Third Annual Report, which was published in March 2006. The new Home
Heat Helpline operated by the Energy Retail Association has been up and running
since October 2005.

Emissions Trading
The UK’s National Allocation Plan (NAP) for the second phase of the EU Emissions
Trading Scheme (2008-2012) was accepted without change by the European
Commission in December 2006.
2006 (continued) On 21st March 2006 the Government published 15 (independently produced) reports
reviewing and revising methodologies for calculating the New Entrants’ benchmarks for
sectors covered by Phase II of the EU – Emission Trading Scheme. The benchmarks
will form the basis for the calculation of New Entrant allocations of carbon dioxide
allowances to installations in the 2008-2012 period and will therefore form an important
part of the development of the UK National Allocation Plan for Phase II of the EU –
Emissions Trading Scheme.

The draft Phase II National Allocation Plan was published for consultation, alongside
the Climate Change Programme Review, on 28 March. The number of CO2
allowances for Phase II will be set within a range representing a reduction of 3 to 8 MtC
a year against projected business as usual emissions. The final decision on this should
be made in June. The NAP also incorporate proposals on scope (some new sectors
added in); allocation methodology; sector classification and new entrant policy.

Coal
British Gas owner Centrica announced in November 2006 that it wants to build the
UK’s first clean coal power plant, which could supply electricity to a million homes. The
company has reached agreement with developer Progressive Energy to develop a
station on Teesside, combining clean coal and carbon capture technology. Gasification
technology will produce synthetic gas from coal, and the resulting carbon emissions
would then be captured and stored. The Teesside plant would be the first coal-fired
station since Drax was built in 1974. Centrica said it would have the fewest emissions
of any fossil fuel power station in Britain.

UK Coal’s Rossington colliery closed on 31 March 2006.

Oil and Gas


Market investment in new and enhanced UK gas infrastructure has continued with the
completion of the Langeled pipeline in September 2006 and Balgzand-Bacton Line
(BBL) pipeline in December 2006 allowing increased flows of Norwegian and
Continental gas to the UK.

A milestone in the history of the UK’s offshore oil and gas industry was reached with
the start of drilling on the 10,000th well in the seabed around the British Isles in October
2006.

The UK is expected to be a net importer of oil and oil products in 2006, returning to
being a net exporter in 2007 as a result of the very large Buzzard field that is due to
commence production in the fourth quarter of 2006.

Electricity
Centrica announced in June 2006 that it would construct an 885 MW CCGT power
station at Langage, Plymouth which is expected to be operational by 2008.

Renewables
Following the Energy Review, a two part consultation document was published in
October 2006. Part 1 consulted on proposals to introduce changes to the Renewables
Obligation and Part 2 was a statutory consultation on a small limited number of
changes to the Renewables Obligation which came into effect from April 2007.

DTI announced development consent approval to two offshore windfarms, both in the
Thames Estuary, in December 2006. London Array, at 1,000 megawatts, will be the
largest offshore windfarm in the world when completed, while Thanet will be 300
megawatts.

The Renewables Obligation Order 2006 has been laid before Parliament. It will come
into force on 1 April 2006.

A recent Carbon Trust report has concluded that wave and tidal could in time provide
up to a fifth of UK’s energy needs.
2006 (continued) Winter Energy Supply
In July 2006, the Government established the Business Energy Forum to ensure that
sound preparations were made for winter. This is a high level group, jointly chaired by
DTI and CBI and bringing together Ofgem, National Grid, energy suppliers and users
and other key players in the energy industry. DTI also created a dedicated page on its
website, to provide information and signposting on winter energy supply issues.

The second annual report to Parliament on the security of gas and electricity supplies
in Great Britain as required under section 172 of the Energy Act 2004 was published in
July 2006.
2005 Energy Review
On 29 November 2005 The Prime Minister and Secretary of State for Trade and
Industry Alan Johnson announced that asked Energy Minister Malcolm Wicks to lead a
review of UK energy policy. The main scope of the review will include aspects of both
energy supply and demand and will focus on policy measures to help us deliver our
objectives beyond 2010. The Review will aim to ensure the UK is on track to meet the
goals of the 2003 Energy White Paper in the medium and long term.

Sustainable Energy Policy


The Energy White Paper published in February 2003 set out the strategy for energy
policy until 2050. A second annual report reviewing progress over the last 12 months
and the way ahead was published in July 2005. Energy Sector Indicators 2005, a
supplement to the Second Annual Report on the Energy White Paper was also
published in July 2005.

Fuel Poverty
The Fuel Poverty Advisory Group published its Third Annual Report. Whilst welcoming
progress made, as well as the enhancements to the Warm Front. Energy Ministers
held a follow up event with the energy supply companies with a proposal to set up a
new helpline; a central point of contact for fuel poverty referrals, developed by the
energy companies. The new Home Heat Helpline operated by the Energy Retail
Association was subsequently set up and started running in October 2005.

Emissions Trading
The EU Emissions trading scheme (ETS) commenced on 1 January. It is one of the
policies being introduced across Europe to tackle emissions of carbon dioxide and
other greenhouse gases and combat the serious threat of climate change. The first
phase runs from 2005-2007 and the second phase will run from 2008-2012 to coincide
with the first Kyoto Commitment Period. Further 5-year periods are expected
subsequently.

The scheme works on a "Cap and Trade" basis. EU Member State governments are
required to set an emission cap for all installations covered by the scheme. Each
installation is then be allocated allowances for the particular commitment period in
question. The number of allowances allocated to each installation for any given
period, (the number of tradable allowances each installation will receive), will be set
down in a document called the National Allocation Plan.

On 14 February the UK published revised provisional list of installation level allocations


under the EU Emissions Trading Scheme, but on 12 April the European Commission
formally rejected the British Government’s request to increase the number of
allowances for use in the first phase by 20 million tonnes, but the UK has lodged an
appeal. Distribution of the 736 million tonnes of CO2 allowances by Defra to eligible
installations in the UK began in April 2005.

Coal
Ellington colliery ceased production in January 2005.

The Live Fast Track Offer Scheme for respiratory disease claimants, which will see
around 80,000 miners offered optional risk payments where initial medical tests show
very low levels of lung disease, went live on 28 February.

The cut-off date for the majority of live Vibration White Finger Services claimants
passed on 31 March 2005. However, there were some agreed exceptions to this date
– live claimants had until 6 months from the General Damages medical to claim and
beneficiaries have up to 31 January 2006 to make claims on behalf of claimants who
died before 31 March 2005.

Oil and gas


February 2005 - BP's Clair field inaugurated. Clair was the largest undeveloped UKCS
resource. BP and partners invested around £650 million in the project, which is
expected to recover reserves of up to 300 million barrels of oil, with potential for a
further 400 million barrels.
2005 (continued) 21 March 2005 - The UK and Netherlands Governments signed an interconnector
treaty to allow the construction and operation of the BBL gas pipeline between
Balgzand in the Netherlands to Bacton in the UK. This will provide a second direct link
between the UK’s gas transmission system and that of continental Europe. It is due to
be operational from December 2006.

4 April 2005 – The UK and Norwegian Governments signed a new oil and gas co-
operation treaty designed to remove the need for a separate treaty each time there is a
new project involving cross-boundary development. In particular it will underpin the
construction of the Norwegian Langeled gas pipeline (supplying up to 20 per cent of
UK gas demand from Winter 2006/07) and will also cover the development of new
trans-boundary fields and the use of host infrastructures for developments across the
median line.

July 2005 – Imports of liquefied natural gas (LNG) commenced at the Isle of Grain
import/storage facility.

6 September 2005 - A record 152 oil and gas production licences were offered to 99
companies under the 23rd Oil and Gas Licensing Round, the highest number since
licensing began in 1964. The results, a vote of confidence in the future of oil and gas
exploration in the UK, herald the entry of 24 new firms to the North Sea. The licences,
covering 264 blocks, are broken down as follows: 70 Traditional licence offers, 38
more than in 2004, 6 Frontier licence offers, 1 less than in 2004, 76 Promote licence
offers, 18 more than 2004.

November 2005 - Malcolm Wicks announced that 24 of the 54 "Promote" Licences


issued in the 21st Round (2003) would continue. Recognising £90 million exploration
investment, Mr. Wicks said "These results prove the innovative drive of the firms
involved and the success of the promote licence concept, without which this acreage
would not have been touched. With clear work commitments it's a great vote of
confidence in the future of the North Sea."

8 November – The UK import capacity of the Bacton – Zeebrugge Interconnector was


increased from 8.5bcm/y to 16.5bcm/y. A second phase enhancement, due to be
completed by December 2006, is progressing to schedule and will bring the UK import
capacity of the system to 23.5 bcm/y.

11 December 2005 – An explosion, said to be the largest incident of its kind in


peacetime Europe, destroyed a large section of the Buncefield Oil Depot in Hemel
Hempstead. In total 20 petrol tanks were involved in the fire, each said to contain three
million gallons of fuel.

21 December 2005 - First gas began flowing from BP's Rhum field, the UK's largest
undeveloped gas discovery. BP said, with the combination of a high-pressure, high-
temperature gas reservoir developed using a long-distance subsea tieback, that Rhum
was a world first. With development costs of £350 million, Rhum is expected to
recover reserves of around 800 billion cubic feet of gas, with daily production likely to
peak at around 300 million cubic feet. The gas, to come ashore at St Fergus, is
expected to meet 2% of UK demand in 2006.

2006 – The UK continued to be a net exporter of oil and oil products in volume terms,
but because of the differential in prices of oil and the various oil products, the UK was
a net importer in value terms for the first time since the early 1980’s.

Electricity
On 1 April 2005, the British Electricity Trading and Transmission Arrangements
(BETTA) took effect. BETTA has introduced a single wholesale electricity market
across Britain by extending the England and Wales market arrangements to Scotland.
This will push prices down for Scottish consumers, and will open up the market and
increase competition. The legislation underpinning BETTA was delivered in the
Energy Act 2004. Under BETTA, National Grid, who previously operated the
transmission network in England and Wales, is now the System Operator for the whole
GB network.
2005 (continued) Coolkeeragh’s new gas-fired power station replaced the Londonderry coal fired power
station in March 2005.

In May 2005, E.On UK announced that it had purchased the 392 MW Enfield Energy
CCGT power station.

Nuclear
British Energy announced on 14 January that it had successfully completed the
restructuring plan it announced in November 2002.

The Nuclear Decommissioning Authority was established on 1 April, following the


transfer of assets and other property rights from BNFL and the signature of initial site
Management and Operation contracts between NDA and BNFL/UKAEA.

Renewables
Malcolm Wicks announced at the British Wind Energy Annual Conference in Cardiff,
that he was giving development consent to a 78 megawatts windfarm at Little Cheyne
Court in Walland Marsh, Kent. The decision follows a public inquiry.

On 8 March 2005, the Energy Minister announced that the Government intended to
exercise the power in section 185 of the Energy Act to adjust the level of transmission
charges paid by renewable generators on the Scottish islands, and possibly the North
of mainland Scotland, subject to consultation. A consultation will be launched in the
summer of 2005.

The DTI has developed and will implement this year a “Wave and Tidal Stream Energy
Demonstration Scheme” worth up to £42 million that will support the first larger-scale
wave and tidal farms. This is funded under the £50 million ‘Marine Renewables
Deployment Fund’ announced by the Secretary of State for Trade and Industry in
August 2004.

The final conclusions and recommendations of the Eskdalemuir Working Group were
accepted by the Ministry of Defence in full. Defence Estates removed all associated
holding objections in place against the 1.6 GW of wind developments in the vicinity of
the seismic array at Eskdalemuir.
2004 Sustainable Energy Policy
DTI published the first annual report on implementation of the Energy White Paper on
26 April as part of a series of documents, all of which contribute to creating a low-
carbon economy. These included the Government's Energy Efficiency Implementation
Plan (Defra), the Combined Heat and Power strategy (Defra), a consultation paper
about biofuels (DFT), and a range of statistical indicators to monitor progress towards
the goals of the White Paper (DTI).

Energy Act
The Energy Act 2004 received Royal Assent on 22 July 2004. It will promote “cleaner,
greener power” and competitive and reliable energy supplies for now and generations
to come. It implements a range of commitments made in the Energy White Paper.

For the first time, one public body (the new Nuclear Decommissioning Authority),
which published its draft Annual Plan for public consultation on 10 December 2004 will
have complete responsibility for the decommissioning and clean-up of the UK’s civil
nuclear sites, and for the safe and effective management of our nuclear waste.

The Act also creates a single wholesale electricity market for Britain, the British
Electricity Trading and Transmission Arrangements ("BETTA"). Provisions within the
Act covering electricity and gas interconnectors implement a number of requirements
in the EU's 2003 Gas and Electricity Directives and its Electricity Regulation.

Fuel Poverty
The Fuel Poverty Action Plan, which is a Government publication, was issued on 30
November 2004 and sets out how the Government intends to meet its first fuel poverty
target for England – that of eradicating fuel poverty in vulnerable households.

Emissions Trading
On 27 October 2004, an announcement was made of the UK’s intention to amend the
National Allocation Plan for Phase 1 of the EU Emissions Trading Scheme (2005-07)
to a higher number of allowances. This reflects finalisation of emission projections
showing higher forecast emissions. The new proposed allocation represented a
greater reduction against projections than previously indicated.

On 11 November 2004, the final Updated Energy Projections (UEP) informing the
National Allocation Plan (NAP) for EU Emissions Trading Scheme (EUETS) were
published on the DTI website. This paper presented the results of further revisions to
the carbon emission projections that have taken place since May 2004.

Renewables
On 2 August 2004, the Secretary of State announced the new £50m Marine Research
Development Fund. This is another step towards promoting renewable energy and
complements support already given for other emerging technologies including wind,
solar and biomass.

On 4 November 2004, the final terms of reference for the 2005/06 review of the
Renewables Obligation (RO) were published. In a separate exercise, a statutory
consultation excise for proposed amendments to secure the Renewables Obligation
was published on 8 September 2004.

Climate Change
On 8 December 2004 the consultation on the review of the UK Climate Change
Programme was launched. The consultation highlights areas where the Government
has identified opportunities further to reduce carbon emissions.

Coal
Hatfield colliery closed in January 2004. As part of the closure of the Selby complex
Wistow mine closed in May 2004, Stillingfleet in September 2004 and Riccall in
December 2004.
2004 (continued) Period 2 of the Coal Investment Aid scheme closed on 1 June 2004. 13 applications
were received requesting £94.7 million of aid.

The Department reached the key milestone of £1 billion in British Coal Vibration White
Finger compensation being paid in week commencing 19 July 2004.

Oil and gas


US oil firm Apache announced plans to spend around £137 million in 2004 on various
projects in the Forties field in the North Sea. This included drilling more than 20 wells
to gain a "substantial" increase in production.

The 22nd Offshore and 12th Onshore Oil and Gas Licensing Rounds were announced
on 4 March 2004. The 22nd Round made available the largest number of offshore
blocks since the 2nd Round in 1965. As well as continuing to include options for
“promote” licences and traditional licences, the Round offered a further new form of
licence, the “frontier" licence, for blocks in the Atlantic Margin, West of the Shetland
Islands.

On 6 July 2004, DTI approved the 300th North Sea field development, Total's Glenelg
field, with expected peak production of 30,000 barrels of oil equivalent a day.

On 28 July 2004, DTI approved the Saturn gas field development. Operator,
ConocoPhillips, expected first gas in Q4 2005 at an initial rate of 74 million cubic feet a
day, with a maximum daily rate of 169 million cubic feet in the following year.
Produced gas will be transported via the Lincolnshire Offshore Gas Gathering System
to the Theddlethorpe Terminal.

On 3 August 2004, production started from the Lundin-operated Broom field. Oil
reserves were estimated to be 36 million barrels for the first phase, with further
development opportunities in area currently being evaluated. Broom will also assist
substantially in extending the Heather field life.

On 8 October 2004, the UK and Norwegian Governments agreed arrangements to


allow the development of two new North Sea fields - Boa and Playfair.

The official launch of the ‘Goldeneye’ development took place on 11 November 2004.
The £300m project, supported by co-venturers Shell, ExxonMobil, Paladin Resources
and Centrica Energy, will provide around 3 per cent of the UK’s gas.

Electricity
On 1 September 2004, the British Electricity and Trading Arrangements (BETTA) went
“Active”. This involved the Secretary of State using her powers in the Energy Act 2004
to change licence conditions so that trailing and testing of the new arrangements could
begin, in preparation for BETTA going “Live” on 1 April 2005.

The findings of the investigation by DTI’s Engineering Inspectorate into the major
power failures in London on 28 August 2003 and in Birmingham on 5 September 2003
were communicated to the respective electricity companies in January 2004.
Inspectors worked closely with the companies to ensure their recommendations were
taken forward.

Scottish Power purchased Damhead Creek power station in June 2004 and became
the sole owner of the Shoreham Power station in September 2004. Centrica
purchased Killingholme power station in June 2004. In July 2004 Scottish and
Southern Energy acquired the Ferrybridge C and Fiddlers Ferry power stations
formerly owned by American Electric Power. Carron Energy re-opened the Fifoots
Point power station in August 2004 and changed the name of the power station back
to Uskmouth.
2004 (continued) Nuclear
The Secretary of State announced on 5 January 2004 that British Energy (BE) had
completed the sale of its interest in its US joint venture, Amergen, in December 2003.
All amounts outstanding under the Government's loan facility to BE have been paid off,
but facility remained available to BE up to a maximum of £200 million.

At the end of February 2004 BNFL’s Chapelcross nuclear power station closed.
2003 Sustainable Energy Policy
The Sustainable Energy Policy Network (SEPN) website was launched in June 2003.
SEPN represented a new way of working for government, ensuring the right
communications and links are made across and beyond government to deliver the
Energy White Paper.

Royal Assent for the Brian White Sustainable Energy Act was announced on Thursday
30 October 2003. The Act implements the DTI Energy White Paper commitment to
provide statutory backing to regulatory impact assessments, including environmental
impact assessments, undertaken by Ofgem for all significant new policies. It also
provides the legal basis for accessing surplus funds from the Non-Fossil Fuels
Obligation held by Ofgem.

Energy White Paper


On 24 February 2003 the Government published its Energy White Paper “Our energy
future – creating a low carbon economy”. The White Paper set out a new energy
policy, designed to deal with the three major challenges that confront the UK’s energy
system: the challenge of climate change, the challenge of declining indigenous energy
supplies, and the need to keep the UK’s energy infrastructure up to date with changing
technologies and needs.

To address these challenges, the White Paper set four new goals for energy policy: to
put the United Kingdom on a path to cut carbon dioxide emissions by some 60 per
cent by about 2050, with real progress by 2020; to maintain the reliability of energy
supplies; to promote competitive energy markets in the UK and beyond, helping to
raise the rate of sustainable economic growth and improve UK productivity; and to
ensure that every home is adequately and affordably heated.

For the first time, the environment was put at the heart of Government’s energy policy,
causing energy efficiency and renewables to feature prominently in the White Paper,
as the main ways of delivering carbon cuts.

Energy Markets
Proposals to complete the liberalisation of the electricity and gas markets across the
EU were adopted on 15 June 2003. The DTI played a leading role in the Energy
Council in ensuring the measures will produce a competitive and open market by
2007.

Fuel Poverty
On 4 March 2003, the Government published its first annual progress report on the UK
Fuel poverty strategy. The Fuel Poverty Advisory Group also reported on this date for
the first time.

Energy Efficiency
In the April 2003 Budget the Government noted that economic growth and social
progress must be balanced with action to protect and improve the environment. One of
the main areas in which the Government confirmed that it would be undertaking further
consultation was on specific measures to encourage household energy efficiency,
following on from an earlier consultation on the use of economic instruments to
promote energy efficiency in the domestic sector.

Coal
Clipstone colliery closed in April 2003 and in June2003 Betwys colliery announced
closure. Output from the Selby complex began to decline prior to its proposed closure
by June 2004.

Coal Investment Aid, with a budget of £60m was launched in June 2003. It is intended
to create or safeguard jobs in socially and economically disadvantaged areas by
encouraging coal producers to enter into commercially realistic projects that maintain
access to coal reserves.
2003 (continued) Oil and Gas
In February 2003, to encourage a wider range of bids for offshore oil and gas
exploration licences, the DTI enhanced the licensing system to include a new
“promote” licence in the 21st Offshore Licensing Round. This new type of licence,
offered at a tenth of the price of a traditional licence for the first 2 years of its term, was
aimed at attracting smaller newcomers wishing to find oil and gas.

On 31 July 2003 the Energy Minister announced the results of the 21st Offshore
Round, offering 88 new North Sea licences. The licences went to 62 companies, 27
being new entrants to the area. The awards underlined the success of the new
“promote” licences, mentioned above.

In October 2003, the Energy Minister met with his Norwegian counterpart to sign an
agreement on key principles that will be incorporated in a new Framework Treaty
covering future cross-border oil and gas co-operation between the two countries. The
Agreement opened the way for the construction of a large gas pipeline (Langeled) from
Norwegian offshore infrastructure capable of delivering up to 20 per cent of the UK's
current gas requirements from Winter 2006/7 and clarified the regulatory regime that
would apply to a range to future cross-border projects.

In November, the Energy Minister gave approval to the giant Buzzard oil field. With an
estimated 500 million barrels of oil to be recovered, and overall investment of £1.35
billion – the largest in the UK North Sea in the last decade, and equivalent to around a
third of the industry total annual expenditure - Buzzard will make a significant
contribution to the UK’s oil production and to the economy.

Power cuts
On 14 August, a large area of the North East USA, including New York, and of Eastern
Canada suffered cascading power cuts. Some 60 million people were affected within
a matter of minutes as the system operators lost control of the networks, causing an
uncontrolled series of power cuts.

On 28 August a power failure occurred affecting large parts of South London and parts
of Kent. National Grid Transco redirected supplies via another circuit but at this time a
separate fault occurred causing loss of supply to 410,000 customers. Power was
restored to all customers in the space of 40 minutes.

Following power failures in London and the West Midlands, The Energy Minister asked
the Engineering Inspectorate (EI) to carry out a detailed investigation of these faults,
including a review of power supply arrangements for London Underground and
Network Rail. In parallel with this, the EI worked on a joint investigation with Ofgem
into these incidents.

Electricity
In January 2003, Powergen announced the closure at the end of March of two already
partly mothballed coal-fired power stations that it had acquired from TXU in October
2002, namely Drakelow and High Marnham. International power also re-instated 250
MW at Deeside for winter 2003/04, and RWE Innogy leased Fifoots Point power
station from its administrators to operate over the winter.

In May 2003, Centrica completed the acquisition of Lakeland Power’s Roosecote


Power Station (229 MW), which had suspended operations in November 2002.
Centrica also purchased Barry Power station (250 MW) from AES in July. Scottish and
Southern Energy bought the distribution network operator, Midland Electricity from
Aquila Networks in July and also acquired 100 per cent of Medway power station (688
MW) in October.

Nuclear
At the end of March 2003 BNFL’s Calder Hall nuclear power station closed.

An agreement was signed in June 2003 allowing UK companies to start nuclear clean-
up work to start in North West Russia.
2003 (continued) During 2003 the Government and BNFL conducted a joint strategy review of the
company. The review conclusions were announced in a written statement to the
House of Commons on 11 December 2003. One of the key conclusions of the review
was that a new BNFL parent company would be established in April 2005, the principal
focus of which would be clean-up activities at UK sites. At the same time, a new group
of subsidiary companies would be established which would have initial responsibility
for managing clean-up and operations at BNFL’s UK sites under transitional
arrangements to be agreed with the Nuclear Decommissioning Authority (NDA).

On 24 June 2003, the DTI published the draft Nuclear Sites and Radioactive
Substances Bill. The draft Bill set out provisions to establish the Nuclear
Decommissioning Authority (NDA), as foreshadowed in the July 2002 White Paper,
Managing the Nuclear Legacy: A strategy for action.

Renewables
Two rounds of Offshore Licensing took place in 2003, which brought forwards a large
number of proposals. Capital grants of £59 million were given to six of the first round
offshore wind projects, with a total capacity of around 530 MW. The awards made in
the second round, which covered 15 wind farm projects, will provide enough electricity
for more than one in six households (4 million homes). The projects are in three
strategic areas (Thames Estuary, Greater Wash and North West) with generation due
to begin 2007-08. North Hoyle – the UK’s first major offshore windfarm – began
generating electricity.
2002 Climate Change levy
In the Chancellor’s 2002 Budget statement he strengthened the existing policy to
support business energy efficiency by announcing proposals to:

• Freeze the climate change levy rates;

• Give complete exemption from the climate change levy to electricity generated
by good quality combined heat and power (CHP) or from coalmine methane.
Implementations of these exemptions are subject to EU state aids approval;

• Add heat pumps, radiant, warm air and solar heaters, energy-efficient
refrigeration equipment and compressor equipment to the list of energy-saving
technologies, which can benefit from enhanced capital allowances against tax.
This provision is also to be extended to equipment for leasing.

Emissions Trading Scheme


The Government’s emissions trading scheme was launched on 2 April 2002. Thirty-
four organisations successfully bid to join the scheme for permits in an auction for
permits held on 11 –12 March 2002.

Energy Efficiency
The Energy Efficiency Commitment is an obligation (expressed as a total energy
saving in TWh) placed by the Government on gas and electricity suppliers to
encourage and assist their customers to make energy savings through measures such
as cavity wall insulation, loft insulation, boiler replacement and energy saving light
bulbs. Suppliers make a contribution to the cost of the measure at a level that will
induce the customer to take it up.

The scheme, began on 1 April, and will run from 2002 to 2005. The overall target on
all suppliers has been set at a level that is expected to lead to estimated ongoing
annual energy savings for consumers of around £275 million by 2005, as well as
annual reductions in carbon emissions of around 0.4 million tonnes by 2005. It is
estimated that the scheme will cost energy suppliers around £3.60 per customer, per
fuel, each year. The scheme focuses help on the fuel poor and companies will be
required to seek at least 50 per cent of their target fuel savings from disadvantaged
customers.

Fuel Poverty
The Fuel Poverty Advisory Group, which had been announced in the November 2001
UK Fuel Poverty Strategy, met for the first time in March 2002. The Group is an
Advisory Non-Departmental Public Body sponsored by DEFRA/DTI. Its primary task is
to report on the progress of delivery of the Government’s Fuel Poverty Strategy and to
propose and implement improvements to regional or local mechanisms for its delivery.

The Group consist of a chairman and senior representatives from organisations such
as the energy industry, charities and consumer bodies. These members would be
representative ex officio members rather than individuals, who should be able to take a
broad and impartial view.

In March 2002, the Department for Transport, Local Government and the Regions
published revised guidance on the decent home standard and how social landlords can
quantify the extent of non-decent housing within their stock to help them better deal
with the problem. A decent home is one that meets the following criteria:

• is above the current statutory minimum standard for housing;

• is in a reasonable state of repair;

• has reasonably modern facilities and services;

• provides a reasonable degree of thermal comfort.


2002 (continued) The Scottish Executive issued its draft Fuel Poverty Statement in March 2002, inviting
comments on the way the Executive plans to tackle fuel poverty in Scotland.

Again in March, Ofgem published its second annual report on its Social Action Plan
setting out progress towards Ofgem’s aim to ensure competition benefits all customers
and to develop polices to help the fuel poor.

Coal
Longannet colliery owned by the Scottish Coal Company Ltd ceased operation and
went into liquidation in March 2002. Price of Wales Colliery closed in August 2002.

Oil and Gas


PILOT “Progressing Partnership” Work Group was launched in March 2002. Within
PILOT, the joint Government/Industry oil and gas task force, a new initiative for
progressing partnership was born. Looking at common behavioural and supply chain
barriers, the Group’s aim was to address issues inhibiting recovery of Britain’s oil and
gas reserves. This led to a number of new initiatives, including getting “fallow” assets
into the hands of those companies best placed to exploit them, and streamlining
commercial agreements, to allow for swifter transfer of licence interests in offshore
acreage.

Gas and Electricity


In October, TXU Europe agreed to sell its UK assets, including 5.3 million electricity
and gas customers and 2.9GW of capacity to Powergen for £1.37 billion. The sale
made Powergen the second largest supplier of retail energy behind Centrica.

Electricity
London Electricity acquired the distribution business of Eastern Electricity and the
distribution and retail businesses of Seeboard.

In March 2002 Fifoots Point coal fired power station owned by AES went into
receivership followed by Lakeland Power’s Roosecote station in November 2002 and
Westfield’s Fife Power in December 2002

Power stations mothballed during 2002 included: one unit at Deeside (International
Power); one unit at Killingholme (Powergen); and two units at Grain (Powergen).

Nuclear Power: British Energy


Following a sudden deterioration in its financial situation, the private sector nuclear
electricity generator, British Energy (BE) approached the Government in early
September 2002 seeking immediate financial support and discussions about longer
term restructuring. The company owns eight nuclear power stations and generates
about 20 per cent of Britain's electricity. In accordance with the Government’s
overriding priorities of nuclear safety and the security of electricity supplies, it provided
short-term financial support to, and entered into discussions with, BE.

BE announced a proposed restructuring plan on 28 November, and the Government is


taking financial responsibility for BE’s historic spent fuel liabilities, and underwriting
new arrangements announced by the company to fund decommissioning and other
nuclear liabilities.

Nuclear
Bradwell power station owned by BNFL Magnox ceased production after 40 years of
service.
2002 (continued) On 4 July 2002, the Government published proposals for radically altering existing
arrangements for managing publicly-funded nuclear clean up in its White Paper,
Managing the Nuclear Legacy: A strategy for action. The cornerstone of the new
policy involved the establishment of a Nuclear Decommissioning Authority (NDA) to
ensure the safe, secure, cost-effective and environmentally friendly decommissioning
and clean up of the twenty nuclear sites currently operated by BNFL and UKAEA. To
this end, it will develop a UK-wide strategy for dealing with the nuclear ‘legacy’. Public
consultation on the White Paper ended on 14 October. Detailed provisions to establish
the NDA were later published in the draft Nuclear Sites and Radioactive Substances
Bill on 24 June 2003.

CHP
In the 2002 Budget it was announced that all CHP generated electricity would be
exempt from the Climate Change Levy (CCL). This is a key measure that is likely to
help set the sector on course to meet the Government’s target of at least 10,000MWe
of CHP capacity by 2010. Previously, only CHP electricity used on site or sold direct
to other users had qualified for CCL exemption. In addition leased assets became be
eligible for Enhanced Capital Allowances (ECAs).

In May 2002, Defra published for consultation the draft CHP Strategy that describes
the full range of measures thought sufficient to for the Government’s target of at least
10,000 MWe of Good Quality CHP to be met by 2010. It included market incentives,
guidance and information, financial assistance and legislative action to support growth
of the CHP industry. The consultation ran between 15 May and 7 August. A summary
document was published on the Defra website in November. The final Strategy will be
published in 2003.

Micro CHP
In the 2002 Budget it was announced that domestic micro CHP installed under the
Warm Front Team will attract the reduced rate of VAT. Micro CHP is a new
technology that we expect to make a significant contribution to domestic energy
efficiency in the future. Reducing VAT on the cost of installation will help to give this
new technology a useful kick-start.

Renewables
On 1 April 2002, the Government introduced an obligation on all licensed electricity
suppliers that required them to supply a specified proportion of their electricity from
eligible renewable sources. That proportion will rise in stages from 3 per cent in the
2002 year to 10 per cent by 2010.

During the year the first two offshore windfarms were approved and construction
began at Scroby Sands and North Hoyle.
2001 Environment
The Government introduced the climate change levy in April 2001. The levy had been
proposed in the 1999 Budget, and its design elaborated in subsequent
announcements.

The levy applies to energy (coal, gas and electricity) supplied to business and the
public sector. It does not apply to energy used in the domestic sector for motive power
in transport or to produce another energy product. There are exemptions for electricity
generated from renewable sources and energy from quality-assured Combined Heat
and Power (CHP) plants.

Levy revenues are recycled to business through an accompanying cut in employers’


National Insurance contributions and a package of energy support to business which
will fund energy efficiency advice to business and investment in low carbon
technologies research and development, to be managed under the new Carbon Trust;
as well as a new scheme of enhanced capital allowances for businesses investing in
energy saving technologies.

Energy intensive sectors, as defined under certain eligibility criteria, receive an 80 per
cent levy discount in return for delivery of energy saving targets in negotiated
agreements with the Government.

The Government worked closely with the business-led Emissions Trading Group to
design a UK Emissions Trading Scheme and published a draft Framework in May
2001, providing guidance for business on how the scheme will work and how
companies can join in. The Government had previously confirmed it would make £30
million (net of tax) available to encourage companies to bid into the scheme and take
the risks associated with taking on a binding emissions cap.

Fuel Poverty
In February, the Government published its consultation draft of the UK Fuel Poverty
Strategy. Following a period of consultation over the summer in 2001, the UK Fuel
Poverty Strategy was then published in November of 2001. The document sets out the
Government’s objectives, policies and targets for alleviating fuel poverty in the UK over
the next 10 years.

The Government announced two new pilot schemes in the November 2002 Strategy.
The Government intends to invite micro-CHP manufacturers to take part in a large-
scale pilot to test the suitability of the technology for fuel poor households. In total up
to 6,000 installations will be carried out over a 3-year period beginning in 2002. If
successful, the intention is to offer this through HEES/WFT from 2005.

The Government also announced its intention to carry out a £5 million pilot to test a
range of renewable energy and related technologies for use in homes that are off the
mains gas network. Technologies for consideration include ground, air and water
source heat pumps, solar water heating, biofuel heating, wind or hydroelectric
generation. Individual pilots would examine the most appropriate renewable energy
solutions for various property types, locations and occupant groups.
2001 (continued) Following the publication of the draft Strategy in February 2001, a Group was set up to
look at the feasibility of extending the gas network to ensure that wherever possible
the gas network provides the widest viable coverage and fullest viable capacity. The
Group reported to Ministers at the end of 2001, the reports key findings were:

• around 1.3 million of the 4.5 million British households in fuel poverty are
without access to mains gas. Of 900,000 English households without gas,
provision of gas central heating and, where practical, loft and cavity wall
insulation could remove 600-700,000, including the great majority of the most
vulnerable, from fuel poverty. Similar or greater impacts would be likely in
Wales and Scotland;

• extension of the network may be particularly appropriate where certain


conditions –size of community, density and clustering of housing and relatively
close proximity to the existing network – coincide. Where connection to the
network is inappropriate, similar results appear obtainable from insulation and
central heating systems used in conjunction with other fuels, such as fuel oil,
that can drive central heating radiators;

• in some cases, other measures may be enough to remove households from


fuel poverty: electric storage heating and insulation would remove 300-
400,000 from fuel poverty, while insulation measures alone would remove
200-300,000.

Coal
Quinquennial Review of the Coal Authority completed. RJB Mining became UK Coal
in May.

In October 2001 Coalpower Ltd assumed ownership of Hatfield colliery, which had
gone into liquidation in August.

Buzzard Oil Field Discovery


In June 2001 the then PanCanadian Petroleum Company announced it had made a
major oil reservoir discovery in the Central North Sea called “Buzzard”. Initial
estimates of recoverable oil were set at 200 to 300 million barrels. Later research
indicated that the original reserves figure was understated by 100 million barrels of oil
recoverable. The discovery confounded the view that there were no more large fields
to be discovered in the North Sea.

Oil
In August 2001 production of gas and oil began at the Franklin field from a North Sea
record depth of 5,500m (18,000 ft) sub sea and at record high temperature of 200
degrees Celsius. The Elgin-Franklin field complex became the world's largest offshore
high-pressure high temperature producing centre.

Electricity
On 27 March the new electricity trading arrangements (NETA) replaced the electricity
pool. NETA is a screen-based trading arrangement similar to that for general
commodity trading – see Chapter 5, paragraph 5.3. A number of reports and
consultations were carried out following the introduction of NETA - focussing in part on
the impact of the balancing and settlement mechanism on small generators.

In October 2001, the formal separation of supply and distribution licences took place.
From that date, no company could legally hold both licences. All former public
electricity suppliers created new company structures to cater for this requirement. In
addition several companies took the opportunity to focus on either supply or distribution
by selling off the other business.
2001 (continued) By the end of the year, Innogy (the demerged domestic arm National Power) owned
the former supply businesses of Midlands Electricity, Yorkshire Electricity and Northern
Electric; TXU Europe owned the supply businesses of the former Eastern Electricity
and Norweb; London Electricity owned the supply business of SWEB as well as that of
London, and Scottish and Southern Electric owned the supply businesses of Scottish
Hydro, Southern Electric and SWALEC. (Scottish Power continued to own Manweb
as well as that of Scottish Power). In the field of distribution, Western Power
Distribution (the renamed distribution business of SWEB) acquired the distribution
business of SWALEC while Northern Electric purchased the distribution business of
Yorkshire Electricity.

In October 2001, American Electric Power bought Ferrybridge and Fiddlers Ferry coal
fired power stations from Edison Mission Energy.

TXU Europe sold the Rugeley coal fired power station to International Power (July),
the West Burton coal fired station to the London Power Company (December), and the
Kings Lynn and Peterborough CCGT stations to Centrica (October).

Nuclear
On the 28 November 2001 the Secretary of State made a statement about the future
management of public sector civil nuclear liabilities. She announced HMG’s intention
to set up a Liabilities Management Authority (LMA) responsible for Government’s
interest in the discharge of public sector civil nuclear liabilities. The establishment of
the LMA, and the transfer of assets and liabilities from BNFL and UKAEA to it, will
require primary legislation.
2000 Fuel Poverty
In the March 2000 Budget the Government announced a change in tax rules to
facilitate BG Transco’s Affordable Warmth Programme, which uses an innovative
application of lease finance, to encourage the installation of installation of insulation
and gas central heating. This programme aimed to install central heating in 850,000
local authority/registered social landlord homes and 150,000 pensioners private sector
homes over the subsequent seven years.

After extensive consultation Ofgem, published its Social Action Plan in March 2000. It
is a framework for action across a wide range of activities to ensure that the economic
benefits of liberalisation is re spread fully among vulnerable and disadvantaged
customers.

The new Home Energy Efficiency Scheme (HEES) was launched in June 2000 to
provide a package of insulation and/or heating improvement measures for households
in receipt of an income or disability benefit. The scheme will have a total budget of
nearly £300 million in the first two years.

The Fuel Poverty Monitoring and Technical Group, which includes representatives from
across Government as well as external organisations, was set up in June 2000. It is
responsible for the development of a suite of indicators for monitoring progress on
tackling fuel poverty.

The Warm Homes and Energy Conservation Act, introduced by David Amess with
Government and cross party support, became law in November 2000. The Act requires
the Secretary of State for England and the National Assembly for Wales ‘to publish and
implement a strategy for reducing fuel poverty and set targets for its implementation’.

Utility Reform
Utilities Act 2000 enacted in June.

Gas
In October, BG plc de-merged into two separate listed companies, of which Lattice
Group plc is the holding company for Transco and BG Group plc includes the
international and gas storage businesses.

Electricity
In March National Power sold Eggborough power station to British Energy and
Killingholme CCGT station to NRG. London Electricity purchased the Sutton Bridge
CCGT station.

In April, the Secretary of State for Trade and Industry announced that he anticipated
lifting the restrictions on the building of new gas-fired power stations, once new
electricity arrangements were in place. This moratorium was lifted on 15 November.

In August, AES’ new coal fired station at Fifoots Point began to generate.

In September, PowerGen sold its Cottam power station to Edf.

Energy Efficiency
In July 1999, the Regulator announced his intention to raise the level of Energy
Efficiency Standards of Performance (EESOP), which obliges electricity supply
companies to improve energy efficiency amongst their domestic consumers, from
£1.00 to £1.20 per customer with effect from April 2000. He also announced his
intention to extend EESOP obligations to gas supply companies, also at a rate of
£1.20 per customer.
2000 (continued) The Utilities Act received royal assent and enabled future EESOP obligations to be set
by the Government. The Government had previously indicated such an intention
explaining that it was appropriate for the Government rather than the Regulator to
decide social and environmental obligations that had significant financial cost. In
March 2000, the Government published a consultation document, “Energy Efficiency
Standards of Performance 2002-2005” seeking views on the format and level of a new
EESOP, and in November, published its provisional conclusions and announced the
re-naming of the obligation as the Energy Efficiency Commitment (EEC).

In November 1999, the Government launched its Good Quality CHP Standard and
confirmed its target of achieving at least 10,000 MWe of CHP capacity by 2010: more
than double current capacity. In December, the Government confirmed that electricity
from CHP plants would be exempt from the Climate Change Levy where the electricity
was used on site or sold direct to the consumers.

Coal
At the end of January 2000 Midlands Mining ceased to produce coal from its only
remaining colliery, Annesley-Bentinck. It ceased to sell coal in June.

On 17 April 2000, the Secretary of State announced a coal subsidy scheme designed
to assist UK coal producers through a difficult transitional period arising from adverse
market conditions and the imminent relaxation of the stricter gas consents policy. The
Government’s objective was to enable those elements of the industry with a viable
future without aid to overcome short-term market problems. The subsidy scheme had
to be approved by the European Commission, which was obtained in November 2000.
Under the scheme, producers of qualifying coal are reimbursed for losses they incur
on coal produced between April 2000 and July 2002, provided they can demonstrate
long term viability and meet other conditions designed to avoid market distortions.

Oil
January 2000: establishment of PILOT, to take over the work of the Oil and Gas
Industry Task Force and give effect to the Task Force's recommendations.

September 2000: signature and publication of Memorandum of Understanding


between Government, oil industry, hauliers, trade unions and police to ensure
continued supply of fuel in the event of any further disruption by fuel protestors.

New and Renewable Energy


In February the Government published Conclusions in Response to the Public
Consultation (“New and Renewable Energy: Prospects for the 21st Century”). The
document summarised the Government's strategy to make progress to a target of 10%
of UK electricity from renewables sources by 2010, subject to the cost to consumers
being acceptable.

In May the European Commission adopted a proposal for a Directive on the promotion
of electricity from renewable energy sources in the internal electricity market. The
Directive itself is to be agreed during 2001.

Nuclear
In February, HSE published three reports into BNFL, covering

• The Storage of Liquid High Level Waste at Sellafield.

• Falsification of Data at the Mox Demonstration Facility.

• Team inspection of the Control and Supervision of Operations at Sellafield.

In March the Government announced that it considered that the earliest date possible
for the introduction of any PPP into BNFL could not be before the latter part of 2002.

In April BNFL published its response to two of the HSE reports, with the third response
to follow in the summer as agreed with HSE.
2000 (continued) In May BNFL acquired the nuclear business of ABB. BNFL also announced a strategy
for managing lifetimes of its Magnox stations. BNFL also closed its Hinkley Point
Magnox station.

In June BNFL’s Wyfla station went offline for extended repairs and maintenance that
was to last until August 2001.

On 1 September 2000, the UKAEA's Directorate of Civil Nuclear Security was


transferred to the DTI as the Office for Civil Nuclear Security (OCNS), to regulate
security within the civil nuclear industry. It will have operational and regulatory
autonomy within DTI.

Environment
Royal Commission on Environmental Pollution report on climate change and energy
In June, the Royal Commission on Environmental Pollution published its major report
"Energy - the changing climate". It referred to the need for much greater international
action if concentrations of greenhouse gases were to be stabilised. It emphasised the
need for a long term vision of how large scale reductions in greenhouse gas
emissions, of the order of 60% of carbon dioxide emissions by 2050, might be
achieved.

Climate Change Programme


The Government published in November its national Climate Change Programme.
The Programme aimed to provide a strategic framework for the Government to deliver
the UK's target under the Kyoto Protocol of reducing emissions of a basket of six
greenhouse gases by 12.5% from 1990 levels in the period 2008-12; and also to move
towards its own domestic policy goal of reducing carbon dioxide emissions by 20%
from 1990 levels by 2010. The Programme drew together a wide range of existing and
planned policies and measures, to engage all sectors of the economy and society in
efforts to reduce greenhouse emissions. Many of these had implications for the
energy sector.
1999 Nuclear
The Government announced that it was looking to introduce a Public Private
Partnership (PPP) into BNFL, subject to the company’s overall progress towards
achieving targets on safety, health, environmental and business performance as well
as further work undertaken by the DTI and its advisers. The Government’s working
assumption was that PPP would involve BNFL as a whole. Existing legislation
provided for the sale of up to 49 per cent of the company.

BNFL, in partnership with US engineering group Morris Knudsen, acquired the global
nuclear business of the US company Westinghouse.

Following Government approval, BNFL commenced uranium commissioning of its


Sellafield mixed oxide (MOX) fuel plant.

Electricity
Opening of supply market to full competition was completed in May. At the end of
June, Ferrybridge and Fiddlers Ferry power stations were sold by PowerGen to Edison
Mission Energy, and at the end of November National Power sold DRAX to AES.

The implementation date for the EU Electricity Liberalisation Directive was February
1999, which required an initial 25 per cent market opening to be implemented, with
nearly all the Member States adhering to the timetable.

In October 1999, the Director General of Gas and Electricity supply (DGGES)
published a report on Pool Prices. This concluded that the trading arrangements
facilitated the exercise of market power. He proposed the introduction of a good
market behaviour condition in the licences of the main generators.

New and Renewable Energy


In March 1999, a third Scottish Renewables Order (SRO) was made for 150 MW
(DNC) of capacity.

In March 1999, the Government published a consultation paper “New and Renewable
Energy - Prospects for the 21st Century”. The legal provision for a new renewables
mechanism was the Utilities Bill announced in the Queen’s speech in November 1999.

Coal
In March 1999, the Government issued mineral planning guidance with respect to
opencast mining.

In April 1999, the Department published its policy paper Energy Paper 67 on research
and development into cleaner coal technologies.

In July 1999 Calverton Colliery closed.

In October 1999, the Government’s Coal Field Task Force published a progress report
relating to the problem of those communities affected by pit closures.

Utility Regulation
New name for the combined OFFER and Ofgas electricity and gas market regulator
announced as Office of Gas and Electricity Markets - OFGEM.

In April, in its response to consultation, the Government confirmed its plans to


establish independent consumer councils.

In July, the Government issued a discussion note on “The Government’s Provisional


Conclusions on how Energy Efficiency Standards of Performance under the proposed
legislation for utility regulation could work”.
1999 (continued) In November 1999, the Government announced a Utilities Reform Bill to provide a new
framework for the regulation of the gas and electricity markets so as to provide a fair
deal to consumers.

Fuel Poverty
The Electricity Association Fuel Poverty Task Force was set up in May 1999 to bring
forward energy related proposals to help alleviate fuel poverty. The task force
comprises representatives from both gas and electricity customers.

In November 1999, an Inter-Ministerial Group on Fuel Poverty was set up to take a


strategic overview of the relevant policies and initiatives with a bearing on fuel poverty,
and to develop and publish a UK Strategy setting out fuel poverty objectives, targets
and the policies to deliver those objectives.

Gas
In June, BG announced it’s restructuring to separate Transco, the regulated pipeline
company, from the rest of the business.

A consultation exercise into the Fundamental Review of Gas Safety was launched by
the Health and Safety Executive.

In September 1999, the HSE issued a consultation document outlining the proposed
amendments to “The Gas Safety (Management) Regulations (GS (M) R)”, with a
closing date for December 1999.

Environment
In the March 1999 Budget, the Government announced its intention to introduce a
climate change levy on the supply of energy to business, following up
recommendations of the Marshall Report.

The Government also followed up Lord Marshall’s recommendations on emissions


trading, by encouraging the launch of an industry-led project to design a pilot scheme
for the UK.

Oil
16th February 1999, the key Brent crude oil benchmark price touched $9 per barrel, a
record low level. However, by December 1999 the oil price had recovered to over $25
a barrel.

Production from the UKCS reached a record level of 137 million tonnes of oil.

Drilling at BP Amoco's Wytch Farm onshore field achieved two world records - longest
production well drilled and greatest horizontal drilling distance achieved.

Oil & Gas industry Task-Force report published in September 1999 set a vision for the
UKCS in 2010, aimed at increasing investment in UKCS activity, increasing
employment in directly linked and related industries, and prolonging UK self-sufficiency
in oil and gas.
1998 Coal
The 5-year contracts with the electricity generators ended in March 1998.

Silverdale Colliery closed in December 1998.

Electricity
The final stage of opening electricity supply markets began in September and was
completed in May 1999.

The Government published a White Paper (CM 4071) on energy sources for power
generation, and adopted a more restrictive policy towards consents for new power
stations, but with special provisions for CHP.

The Monopolies and Mergers Commission recommendation on revised transmission


and distribution price control on Northern Ireland Electricity, which was subject to
judicial review, was upheld by the Northern Ireland Court of Appeal.

Gas
Introduction of supply competition in Great Britain was completed in May 1998.

In April, the gas levy was reduced to zero.

The European Union Gas Liberalisation Directive entered into force in August 1998.

In October, the UK - Belgium interconnector became operational, providing a path for


UK gas exports to markets in Europe as well as another route for imports of gas into
the UK.

Revision of Frigg Treaty with Norway was signed in August 1998.

New and Renewable Energy


The fifth Non-fossil fuel obligation (NFFO) Order was laid in September 1998 for 1,177
MW of capacity.

Oil
International agreement reached on decommissioning and disposal of offshore
structures.

New Regulations required Environmental Impact Assessments for offshore projects.

200 oil and gas fields in production in the UK.

Nuclear
In January, the Government transferred its shareholding in Magnox Electric to BNFL
as the first stage of a merger of the two companies. Full integration of the combined
business of the two companies was completed early in 2000.

The Health and Safety Executive and the Scottish Environment Protection Agency
completed a full audit of safety at UKAEA Dounreay.

The acceptance of a small consignment of uranium from Georgia for non-proliferation


reasons was subject to scrutiny by the Trade and Industry Committee, who approved
of the Government’s decision.
1998 (continued) Utility Regulation
In March, following an inter-departmental review, the Government published a Green
Paper entitled ‘A fair deal for consumers’ on utility regulation aimed at ensuring that
consumers got a fair deal from regulation, and at making regulation more consistent,
transparent, and accountable. The Government’s conclusions, in the light of
consultation, were published in July, including confirmation that the regulators for gas
and electricity should be merged and that the Electricity Act 1989 should be amended
to require the distribution businesses of the PESs to be licensed separately from their
supply businesses. Detailed proposals on energy and the creation of independent
consumer councils were published in November.

In October, the Government published its consultation document on “Possible


Provisions for Energy Efficiency Standards of Performance in the New Framework of
Utility Regulation”.

A new gas regulator was appointed in November 1998; he also took over as electricity
regulator in January 1999.
1997 Regulation
In June, the Government announced a review of utility regulation, to cover in particular
electricity, gas, telecommunications, and water. It was aimed at ensuring that
consumers get a fair deal from regulation, and at making regulation more consistent,
transparent and accountable.

Electricity
Revised Transmission Price control took affect from 1st April reducing prices further
over four years.

In October, the Government announced a review of the electricity trading


arrangements including the Electricity Pool. OFFER were asked to report by July
1998.

In December, the Government announced a review of fuel sources for power stations.
A consultation paper was issued in June 1998.

The Regulator announced a proposed timetable starting in April 1998 for the rollout of
the final stage of supply competition using customer postcodes. The Regulator
subsequently modified the timetable and put in place arrangements for the extensive
testing of the systems necessary to make competition work.

Gas
Following the increased expenditure on exploration and development of gas fields in
the North Sea in the early 1990s, gas production increased to the point where the UK
became a net exporter of gas for the first time.

By March competition in the domestic market was extended to include another 0.5
million households in Avon and Dorset and 1.1 million households in the South East of
England, bringing the total to two million customers. Over 20 per cent of these
households switched to a new supplier by the end of 1997.

In November 1997, as part of the next stage in the liberalisation of the gas industry,
competition was extended to another 2.5 million domestic customers in Scotland and
North East England.

Nuclear
On 1 April 1997, the Fossil Fuel Levy in England and Wales was reduced to 2.2 per
cent (from 3.7 per cent in November 1996).

New and Renewable Energy


The fourth Non Fossil Fuel Obligation (NFFO-4) Renewables Order for England and
Wales made for 873 MW Declared Net Capacity (DNC).

The second Scottish Renewables Order (SRO-1) was made for 112 MW of capacity.

John Battle, Minister for Science, Energy and Industry, announced a review of
renewables energy policy on 6 June 1997.

VAT
On 1 September, VAT on domestic gas and electricity supplies was reduced to 5 per
cent.

Windfall tax
In the July Budget, the Government announced that the privatised utilities would have
to pay a one-off windfall tax on the excessive profits they had made, payable in two
instalments - one in 1997 and the other in 1998. Altogether this was expected to raise
£5.2 billion.
1997 (continued) Winter Fuel Payments
Winter Fuel Payments were introduced in the winter of 1997 for Great Britain (a similar
scheme existed in Northern Ireland). Everyone over the age of 60 received the
payment, regardless of whether they are getting a state Pension or any other social
security benefits.

Oil
November 1997 saw the start of production of oil from the Foinaven field. This was the
first production from the British area of the Atlantic Margin known as the West of
Shetland.
1996 Coal
In January the company Coal Investments ceased trading, closing four pits and selling
two to Midlands Mining Ltd.

In May the National Audit Office published its report into the privatisation of British
Coal’s mining activities.

Electricity
The revised Distribution Price control (further tightened as a result of the second
review in 1995) took effect from 1st April.

In July 1996 Eastern Group leased a total of 6 GW of coal-fired electricity generation


capacity from National Power (4 GW) and PowerGen (2 GW). As a result, the pool
price cap was lifted.

Bids made by National Power and Powergen for Southern Electric and Midlands
Electricity respectively in 1995, which would have allowed significant vertical
integration between generation and supply in the industry, were prohibited by the
President of the Board of Trade in April following an investigation by the Monopolies
and Mergers Commission.

Gas
On 6 February in response to the separation of licensing for gas distribution and supply
in the Gas Act 1995, British Gas Plc announced it was demerging into two companies,
one responsible for the transmission of gas (BG Transco) and one for the supply of gas
(Centrica).

On 1st April, the first stage of the introduction of competition in the domestic market
began - around 540,000 customers in South West England were enabled to purchase
their gas from a variety of suppliers. By the end of the year just under 20 per cent of
households switched to a new supplier, whose prices were on average 10-20 per cent
less than those charged by British Gas.

Nuclear
The nuclear generating industry was formally restructured on 31 March 1996 in
preparation for privatisation. A holding company, British Energy plc (BE) was created,
together with two subsidiary companies - Nuclear Electric Ltd, (now called British
Energy Generation) which now operates the PWR and five AGR stations in England
and Wales, and Scottish Nuclear Ltd (now called British Energy Generation UK), which
operates two AGR stations in Scotland. In July 1996 British Energy, which operates
the AGR/PWR nuclear electricity power stations in the UK was floated on the London
Stock Exchange by the Government. Magnox stations remained in the public sector
under the ownership of Magnox Electric plc. Magnox Electric and BNFL merged early
in 2000.

Because of the privatisation of British Energy, on 1st November, the Fossil Fuel Levy
in England and Wales was reduced from 10 per cent to 3.7 per cent (on 1st April 1997
it was reduced further to 2.2 per cent).

The premium element of prices payable in Scotland under the Nuclear Energy
agreement ended in July 1996. A new Fossil Fuel Levy was introduced at a rate of 0.5
per cent to support renewable energy.

In September, AEA Technology, the commercial arm of the UK Atomic Energy


Authority, was privatised.

Regulation
On 10th June, the Office for the Regulation of Electricity and Gas (OFREG) was
formed to perform a similar role in Northern Ireland to that of OFFER and OFGAS in
England and Wales. It Is unique in that it Is the only combined utility regulatory office
in the UK.
1995 Coal
The Domestic Coal Consumers Council was abolished.

Electricity
In March, the Government’s ‘Special Share’ in each of the Regional Electricity
Companies expired. The companies were then exposed to the full disciplines and
opportunities of the market, including acquisitions and mergers. In 1995 there were
four bids involving Regional Electricity Companies, followed by a further seven
successful bids in 1996 and two more in the first half of 1997.

In March, the Government also floated its remaining 40 per cent share in National
Power and PowerGen on the London Stock Exchange. It did, however, retain its
‘special share’ in these companies.

Following a review, the distribution price control was revised from 1st April.

The DGES decided to review again the Distribution Price Control following Northern
Electric’s defence against a take-over bid from Trafalgar House.

The National Grid Company was floated on the London Stock Exchange in December.
As a result, customers of the Regional Electricity Companies received a discount of
£50 on their electricity bills in early 1996 as their share of the benefit from the sale.
Before the company was floated, its Pumped Storage Business was transferred to a
new company, First Hydro, which was then sold to a US generator, Mission Energy.

The Government still holds a special share in the National Grid Company which is not
time limited.

Gas
The Gas Act 1995 set out the Government’s plans for the liberalisation of all gas
markets, including the domestic sector. The Government and the industry put into
place the licensing framework and the administrative/computer framework required to
support the forthcoming gas pilot trials.

By the end of 1995, there were 40 independent gas marketing companies selling gas
to UK end-users. They had captured 80 per cent of the firm industrial and commercial
market, and 70 per cent of the market for “interruptible” sales.

The development of a “gas bubble” (an excess of supply over demand) in 1995 and
into 1996 led to a sharp fall in the spot price of gas from 0.7p/KWh to around
0.4p/KWh (10p per therm). The main beneficiaries of this were customers on short-
term gas contracts.

Oil
Production from the UK sector of the North Sea and onshore sites reached a new
record level of output at 130.3 million tonnes per annum.

Nuclear
In February, electricity generation began at Sizewell B, the UK’s only pressurised
Water Reactor, whose construction had been completed the previous year.

In May, the Government published a White Paper on the prospects for nuclear power
in the UK. It concluded that nuclear power should continue to contribute to the mix of
fuels used in electricity generation, provided it maintained its current high standards of
safety and environmental protection; that building new nuclear power stations was not
commercially attractive; and that there was no justification for any government
intervention to support the construction of new nuclear stations.
1995 (continued) Energy Conservation
The Home Energy Efficiency Act 1995 (HECA) requires all UK local authorities, with
housing responsibilities, to prepare an energy conservation report, identifying
practicable and cost-effective measures to significantly improve the energy efficiency
of all residential accommodation in their area; and to report on progress in
implementing the measures.

1994 Coal
Coal Authority was brought into legal existence under Section 1 of the Coal Industry
Act 1994 on 19th September.

The 31st October was the Coal Authority “Restructuring Date”. Ownership of Britain’s
coal reserves was transferred to the Authority and it assumed its full range of functions
including powers to license coal operations.

In December, British Coal Corporation's mining activities were sold to the private
sector.

Electricity
In April, competition in the electricity market was extended to include all customers
whose demand exceeded 100 kW.

From 1 April the revised (tightened) supply price control took effect.

OFFER imposed the first Energy Efficiency Standards of Performance (EESOPs) on


electricity companies, requiring them to promote and carry out energy efficiency
measures for their customers. At the same time OFFER included within the price
controls a charge of £1 per customer per year to pay for the measures. This first
EESOP covered the period 1994-1998, but was subsequently extended, at the same
level, until March 2000.

New and Renewable Energy


The third Non Fossil Fuel Obligation (NFFO-3) Renewables Order for England and
Wales was made for 627 MW Declared Net Capacity (DNC).

The first Scottish Renewables Order (SRO-1) for Scotland was made for 76 MW
Declared Net Capacity (DNC).

The first Northern Ireland NFFO (NI-NFFO-1) Renewables Order was made for 16 MW
Declared Net Capacity (DNC).

VAT
In April, the Government introduced VAT on domestic fuel at a rate of 8 per cent.
1993 Coal
Coal Review White Paper, “The Prospects for Coal”, published on 23rd March. Main
conclusions were:

• subsidy to be offered to bring extra tonnage down to world market prices,

• no pit to be closed without being offered to the private sector,

• no changes to the gas and nuclear sectors,

• increased investment in clean coal technology,

• regeneration package for mining areas increased to £200 million.

On 2nd December, the Coal Industry Bill was published. Its main features were:

• to enable privatisation,

• to establish the Coal Authority,

• to protect the rights of third parties,

• to safeguard pension and concessionary fuel entitlements

• to retain HSE and HM Mines Inspectorate as bodies responsible for mine


safety & inspection.

Electricity
In June, Northern Ireland Electricity plc was floated on the London Stock Exchange.

Gas
The Monopolies and Mergers Commission published a report on competition in gas
supply.

Oil
Unleaded petrol sales accounted for 50 per cent of the total UK market for motor
spirits.

1992 Electricity
In March, generation in Northern Ireland was transferred from Northern Ireland
Electricity to four independent generation companies. Northern Ireland Electricity plc
became responsible for transmission and distribution and supply. A special share was
retained in Northern Ireland Electricity.

Gas
Following the withdrawal of BG’s legal monopoly relating to the non-tariff or contract
market for customers with demand greater than 25,000 therms per annum, British Gas
was prompted in March by the Director General of Fair Trading to create the conditions
whereby competing suppliers should be able to supply at least 60 per cent of the
market for customers whose demand exceeded 25,000 therms. In August, the market
sector open to competition was extended to include customers with an annual demand
of between 2,500 and 25,000 therms. The agreement between British Gas and the
Director General of Fair Trading was then redefined as 45 per cent of the market for
demand greater than 2,500 therms per annum.
1991 Electricity
60 per cent of the shares in National Power and PowerGen were floated on the
London Stock Exchange in March. The Government retained the remaining 40 per
cent of shares. Scottish Power and Scottish Hydro Electric were floated in June. The
Government retained ownership of Nuclear Electric. In England and Wales the long-
term costs of generation from nuclear sources were funded from the proceeds of the
“Fossil Fuel Levy” on supplies of certain electricity. In Scotland contracts were
established with the Scottish PESs for the output of the Scottish nuclear generating
stations.

New and Renewable Energy


The second Non Fossil Fuel Obligation (NFFO-2) Renewables Order for England and
Wales was made for 457 MW Declared Net Capacity.

Oil
The Gulf War began in mid-January and ended in late February, following the
occupation of Kuwait by Iraq in August 1990. This provoked worldwide concern about
the availability of oil. The annual average price of crude oil rose sharply, and took two
years to settle back to its pre-war level.

One hundred oil and gas fields were in production in the UK.

1990 Electricity
The new licensing regime for electricity companies was established along with the post
of Director General of Electricity Supply (DGES) by the 1989 Electricity Act. The Act
also gave powers to the Secretary of State for Trade and Industry to replace existing
public electricity boards by Plc’s. The Office of Electricity Regulation (Offer now
merged with OFGAS to form OFGEM) set up in shadow form.

Provisions of the Act came into force in March. The Central Electricity Generating
Board (CEGB) was split into four companies, National Power and PowerGen (fossil
fuel generation), Nuclear Electric (nuclear generation) and the National Grid Company
(NGC) (transmission). Twelve Regional Electricity Companies replaced the Area
Electricity Boards. At the same time, the South of Scotland Electricity Board and North
of Scotland Hydro-Electric Board was replaced by Scottish Power and Scottish Hydro-
Electric (generation, transmission, supply and distribution) and Scottish Nuclear
(nuclear generation). The ordinary shares in the National Grid were transferred to the
12 Regional Electricity Companies (RECs).

At vesting, (31 March) price controls, put in place by the Government, came into being
for the transmission business of NGC and the supply and distribution businesses of
the RECs. There was not a generation price control as this sector was open to
competition from the start.

The 12 Regional Electricity Companies in England and Wales were floated on the
London Stock Exchange in December. The Government retained a special share in
each of the privatised companies, known as the ‘Special Share’, which prevented any
other investor from buying more than 15 per cent of the shares for a period of five
years.

At the same time the market for customers with demand exceeding 1 MW was opened
up to competition.

During 1990 the Electricity Pool was established. This was a trading mechanism (now
superseded), which called generators online to provide a “pool” of electricity for
suppliers to purchase. Other than for a few very large contracts, there were no direct
contracts between generators and suppliers/users.

New and Renewable Energy


The first Non Fossil Fuel Obligation (NFFO-1) Renewable Order for England and
Wales made for 102 MW Declared Net Capacity (DNC).
BEIS news stories including press releases, speeches and statements
are available at: www.gov.uk/government/announcements

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