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UKDEA Media Release

 

Treasury Carbon Price Support proposals set to damage investment in decentralised low-carbon generation

15th February 2011

The UK District Energy Association (UKDEA) responded last week to the Treasury’s consultation on proposed Carbon Price Support (CPS) mechanisms. Part of the wider government proposals for electricity market reform, the government consultation advocates the introduction of a new carbon tax on fuels used in power generation. The stated aim of this new carbon tax is to “support and give certainty to the price of carbon in the UK electricity generating sector.”

Unfortunately, the current proposals do not take into account the substantial benefits of gas-fired combined heat & power (CHP) and the importance of this technology to the UK’s district energy industry. As the proposals stand, no ‘carve-out’ is proposed for low-carbon gas-fired CHP, and therefore CHP operators would have to pay this new tax on all input fuels, despite the fact that CHP produces heat as well as power and the CPS is intended to be a tax only on electricity generation.

Gas-fired CHP is currently one of the primary means of decarbonising existing district heating networks and often one of the most viable technologies when considering installation of new, low-carbon, decentralised energy systems. CHP is an important part of the low-carbon energy mix, often able to provide comparable and superior carbon savings to many renewable technologies.

As the UKDEA made clear in its consultation response, introduction of the current proposals would have the following negative effects:

  • Reduced funding and implementation of new CHP based low-carbon district energy schemes, with a direct negative impact on the carbon savings achievable by the UK’s decentralised energy industry;
  • Severely limited reach for future forms of low-carbon, decentralised energy plant; for example, without the financing and installation of gas-fired CHP schemes, there will be no progression to biomass-fired CHP schemes, as this important technology becomes more financially viable.
  • Substantial increases in fuel poverty; district heating schemes often supply significant numbers of consumers in fuel poor areas and additional costs for CHP would therefore disproportionately affect those in fuel poverty. It is unclear whether this disproportionate outcome has been adequately taken into account by the consultation’s Impact Assessment.

Chairman of the UKDEA, Simon Woodward, said:

“Applying a new tax to CHP would result in several negative outcomes, including damaging the viability of existing low-carbon district heating schemes, thereby penalising those ‘early adopters’ of district energy, who are using gas fired CHP as means to rapidly develop a scheme, where other forms of low carbon generation are not viable or sufficiently mature, but which can be retrofitted as the scheme expands.”

To protect the UK’s essential decentralised energy industry, the UKDEA proposes that CHP should remain exempt from the proposed new CPS tax, utilising the existing CHP Quality Assurance (CHPQA) system to ensure that only CHP which genuinely achieves carbon emissions savings is eligible for exemption.

The UKDEA will follow developments with the Carbon Price Support proposals, very closely. If the Coalition’s aim to be the “greenest government ever” is to be genuinely and sustainably realised, great care must be taken to ensure that new policies consider all scales of the UK’s low carbon industries and not just the large-scale generators and suppliers.

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Ends

Notes to Editors:

The partners, owners and operators of the largest district energy schemes in the UK have aligned themselves in the creation of the UK District Energy Association (UKDEA); with the aim of not only promoting District Energy as a means to deliver significant carbon savings, but also to establish a direct link between the Government and the industry's small market base.

The Association is a not for profit association of companies and public sector organisations involved or interested in District Energy schemes. The UKDEA initially comprised of the representatives of the 6 main District Energy schemes in the UK today:

Birmingham City Council,

Enviroenergy Limited,

Veolia Environmental Services Limited,

Southampton City Council,

Thameswey Limited and

Cofely District Energy Limited

Together these six organisations represent the: Birmingham, Milton Keynes, Nottingham, Sheffield, Southampton and Woking District Energy schemes.

The UK District Energy Association’s aim is to represent current and potential owners, developers, consumers, partners, operators and product suppliers of District Energy schemes throughout the UK.

For more information contact:

Chris Tanner, Secretary for the UKDEA

Thames Head Wharf, Tetbury Road, Cirencester, Gloucestershire, GL7 6NZ

Tel: 01285 770615

Mobile: 07773 457941

Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Website: www.ukdea.org.uk


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