Building more gas power plants could release hundreds of millions of pounds a year for greater cuts in emissions, more home insulation and additional low carbon research and development, a new report by leading think tank Policy Exchange has found.
A more balanced approach to electricity generation over the next decade – which enables the market to bring forward cheaper, new gas generation instead of some of the most expensive planned investments such as offshore wind – could save £700-900 million a year, even if the power plants are shut much earlier than they might otherwise be. Such an approach would still allow huge investment in renewable generation, including 9GW of offshore wind by 2020.
Policy Exchange sets out how the government might use the savings:
- £280 million a year would be sufficient to double research, development and demonstration (RD&D) in key low carbon technologies identified by the Committee on Climate Change
- £125 million a year could be spent on improving household energy efficiency measures. That money could deliver an average 360,000 more loft insulations a year
- The remainder of the money saved could be used to buy and retire sufficient EU ETS carbon permits each year to offset the gas generation’s emissions six times over
The report – Fuelling transition: Prioritising resources for carbon emissions reduction – says the electricity market needs to be allowed to invest in gas as a transition fuel, subject to a long-term EU emissions cap. Extending the EU cap to 2035 would give greater certainty to investors, allowing the market to decide which technology has the most potential to deliver emission reductions at the cheapest cost.
Dr Simon Less, author of the report, “We need a proper debate about the right rate of deployment of the most expensive renewable technologies. Subsidised deployment helps us to discover which technologies are likely to become competitive. But we must not put too much money on a few, unproven horses. We need to make best use of limited resources to maximise emissions reduction and overall low carbon innovation.”
Guy Newey, Head of Environment and Energy at Policy Exchange, “Allowing the market to invest in gas as a transition fuel frees resources that could be used to boost innovation in promising zero carbon technologies. Making sure it is a transitional fuel underlies the need for a long-term EU emissions cap. Under such a cap, emissions will be no higher and gas-fired power plants will be retired early or retrofitted with Carbon Capture and Storage when the cap bites.”
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