Energy and Climate Change Secretary Ed Davey has today announced that the Coalition has reached an agreement concerning future energy policy. This means that the Energy Bill can be launched next week with electricity market reforms up and running by 2014. Concerns have been expressed however over the amount of market support available for low carbon electricity investment under the Levy Control Framework up to 2020. The Levy Control Framework (LCF) forms part of the Government’s public spending framework, which the Treasury has responsibility for. Its purpose is to make sure that DECC achieves its fuel poverty, energy and climate change goals in a way that is consistent with economic recovery and minimising the impact on consumer bills.

The LCF budget is currently £2.35 billion for low carbon electricity in 2012/13. Under the agreement announced today low carbon electricity spending under the LCF will rise to £7.6bn in real terms in 2020/21. The final limit will be set in nominal terms on revised ONS and OBR numbers in the New Year. On current figures this would equate to £9.8bn in 2020/21. The spending settlement announced today does not cover the ECO or Warm Homes Discount, which have separate spending limits to 2015.

The idea is to diversify the UK energy mix to avoid excessive gas import dependency by increasing the amount of electricity coming from renewables from 11% today to around 30% by 2020, principally from offshore wind, as well as supporting new nuclear power and carbon capture and storage commercialisation.

Some commentators consider that in moving toward a mix of offshore wind and new nuclear capacity, the government is limiting its options and settling for expensive, potentially environmentally damaging and unpopular technology which may be seriously delayed.

David Elmes, Professor of Practice and Academic Director at Warwick Business School said: “We are concerned this bill still fails to provide a clear framework for a successful future. The Prime Minister’s commitment to be the ‘greenest government ever’ has been fudged by pushing any decision on a target for decarbonising electricity until after the next election.”

“In work here at Warwick we have studied the decisions and investments that companies may need to take to meet the world’s future needs for energy.” said Elmes. "By pushing out key decisions, the UK has less of a blueprint for the future and faces more of a scramble where environmental commitments the Government has signed up to may be missed and the investments needed to keep the lights on may not be made in time.”

Monica Giulietti, Associate Professor of Global Energy at Warwick Business School, agrees that the Energy Bill needs to produce an environment that attracts significant investment, but she is also worried the Government has picked nuclear and offshore wind power too early. “The key issue is investment and how it is going to happen,” said Dr Giulietti. “Will the bill promote the necessary investment and to some degree are the choices of investment that this bill promotes still the right choices?

“There is still a lot of research going on into the different types of energy supply, storage and consumption. Other countries are promoting a much broader base to pick from.”

Dr Giulietti added: “The UK is picking its winners now. The risk is that other countries will invest in methods of producing energy that are cheaper, finding ways to use their energy more efficiently and we will have committed ourselves to solutions that are more expensive. Also nuclear and offshore wind are big, long term projects which might not be delivered on time or work as planned.”

Meanwhile Tom Pakenham, founder of London-based Green Tomato Energy, says the Government’s Energy Bill has missed the opportunity to support home owners and businesses reduce energy consumption.

He said: “The most notable feature of the coalition policy is its failure to address the enormous and common sense opportunity offered by investment in energy efficiency, both in businesses and in the home. On a pound-for-pound basis, energy efficiency represents the fastest and most-effective way to provide energy security, reduce fuel poverty and maintain low energy bills for consumers. On top of this, it is a proven job creator across many industries and company sizes, far more so than building large power stations.

“The government’s failure to invest directly in this, whilst committing so much money to direct subsidies for nuclear and renewables and supporting a second dash for gas, is a massive missed opportunity.”

Tom added that the delay in setting carbon targets was also “extremely worrying”.

He said: “In light of latest figures on carbon emissions and likely Intergovernmental Panel on Climate Change announcement in early 2013 that carbon emissions are worse than previous worst-case projections, the government’s decision to delay setting carbon targets until 2016 is also extremely worrying. Political and business leaders in the UK need to start being honest with the people of Britain – energy is going to get more expensive due to growing global demand and increasing scarcity of easily accessible fossil fuels.

“We are going to need to move away from reliance on highly energy dense fossil fuels and find ways on running our society using renewables, which is possible in the context of efficient consumption. If we start this process now, we stand a chance of it not being too painful. The longer we delay, the harder it will get and the more it will cost. The Energy Bill is an opportunity to do this, but it seems that yet another government is too politically weak to stand up and make this point.”