Far-reaching reform of the UK electricity market is needed to meet our renewables and carbon targets while maintaining security of supply and minimising consumer bills. Through the Energy Act 2013, the Government is taking forward a programme of Electricity Market Reform which will provide efficient long term support for all forms of low carbon generation — including nuclear, renewables and Carbon Capture & Storage (CCS).

DECC has published levelised costs estimates of various generation technologies on the DECC website since 2010. The levelised cost of a particular generation technology is the ratio of the total costs (including construction and operating costs) of a generic plant to the total amount of electricity expected to be generated over the plant’s lifetime (per megawatt hour). They do not include revenues or support payments. These are available on the following website:

https ://www.gov.uk/government/collections/ energy-generation-cost-projections

DECC's most recently published figures for current and future levelised costs are available in the following report Electricity Generation Costs (December 2013):

https://www.gov.uk/government/uploads/system/uploads/attachment_data/fi1e/269888/131217_Electricity_Generation_costs_report_December_ 2013_Final.pdf

Table 1 below uses figures taken from this report, and shows a range of levelised cost estimates for projects starting pre-development in 2013 and 2019 for selected technologies, using a 10% discount rate. Please see the report for more information.

Levelised cost estimates for different types of electricity generation are highly sensitive to the assumptions used for capital costs, fuel and EU ETS allowance prices, operating costs, load factor, discount rate and other drivers and this means that there is significant uncertainty around these estimates.

Her Majesty’s Government has not taken a decision to limit the number of Investment Contracts awarded to biomass conversion projects. The technology-based rules included in the FID Enabling for Renewables affordability assessment are designed to ensure that the process supports at least a minimum amount of each technology type (which have met the qualifying and minimum threshold criteria).

Final Investment Decision (FID) Enabling for Renewables is one of the measures under the Government’s Electricity Market Reform programme

designed to ensure a reliable, diverse and low-carbon power market. DECC has robust plans to deal with security of supply, working jointly with National Grid and the energy regulator Ofgem.

The FID Enabling for Renewables process was developed taking account of the need to ensure that value for money should be delivered whilst averting investment hiatus and delivering a mix of technology in line with the 2020 renewables target and the Electricity Market Reform Delivery Plan.

If sustainable biomass is used as a fuel to replace coal, significant greenhouse gas savings can be achieved. Life cycle emissions of electricity from wood used in the UK power stations, calculated using the methodology in the directive 2009/28/EC of the European Parliament and of the Council, are less than 280 kg CO2e/MWh delivered electricity, whereas the calculated¹ average greenhouse gas emissions of electricity from coal in the UK are around 1060 kg CO2e/MWh delivered electricity.

Emissions calculated using 'direct' and 'indirect' greenhouse gas emissions associated with coal combustion from the 2012 Government conversion factors for company reporting, and the average UK fleet efficiency of coal power stations from the Digest of UK Energy Statistics 2012.

Table 1 below gives the estimated emissions from electricity generated by coal and gas (given as grams of CO2 per kilowatt hour supplied). These are taken from table 5C of the Digest of UK Energy Statistics. Due to the small amounts of oil now used in electricity generation these figures are no longer published.

Table I: Carbon dioxide emissions from electricity generation

The carbon intensity of biomass varies, depending on the type of biomass (e.g. wood pellet, manure, saw mill residues), its country of origin, and emissions associated with processing the biomass and transporting it to the power station. Typical estimated emissions from power generation from biomass range between 50 and 280 g CO2 equivalent per kWh electricity. These figures are calculated using the European Commission RED Life Cycle Analysis methodology, which assumes that absorption of carbon dioxide by the biomass growth is equal to that emitted by combustion, unless the land use has changed categories since 2008, in which case any reduction in carbon stored on the land is accounted for.

The UK compiles an annual inventory of greenhouse gas emissions in accordance with the requirements of the United Nations Framework Convention on Climate

Change (UNFCCC). The inventory includes the carbon losses and sequestration associated with land use, land-use change and forestry (LULUCF). The inventory is published at:

https://www.gov.uk/government/publications/uk-greenhouse-gas-inventory.

With regard to bio-energy, where wood from UK or EU forests is consumed as a source of fuel it is accounted for in the LULUCF sector. The net change in carbon stock due to the use of wood as fuel is thus accounted for in the UK's emissions total. Also any fossil fuel emissions arising from transport of biomass or harvesting activity will be accounted for in the relevant sectors.

Under the second commitment period of the Kyoto Protocol, accounting for Forest Management is mandatory. The EU also requires Member States to account for emissions due to Forest Management activities on a mandatory basis thereby ensuring implementation of the UNFCCC accounting rules within the EU. Wood imported from outside the EU for fuel, is not accounted in EU emissions inventories as responsibility for reporting those rests with the producing country.

The UK will take a decision in due course on accounting for voluntary activities under the second commitment period of the Kyoto Protocol and EU LULUCF accounting—including cropland management and grazing-land management which is relevant to bio-energy.

DECC has analysed the potential contributions from different renewable, low carbon and fossil fuel technologies to develop scenarios of how the UK could cost-effectively achieve its energy and carbon targets in 2020 and beyond. We have not made estimates for individual power stations. However, as outlined in our Bioenergy Strategy, the use of sustainable biomass as a transitional fuel to reduce carbon emissions from current coal power generation is an important decarbonisation pathway.

The Renewables Obligation (RO) biomass subsidy levels, which, subject to state aid approval will take effect on 1 April 2013, do not reflect the Office of Rail Regulation's (ORR) proposal on track access charges, published on 15 February. The (RO) support levels for biomass power generation announced by the Government on

25 July 2012¹ reflect the decision taken by the ORR in May 2012² not to propose a charge at that time, but to await the outcome of the comprehensive review of RO subsidies before considering whether to propose such a charge as part of its 2013 periodic review of rail freight charges.

Renewables Obligation Banding Review Government Response. DECC July 2012.

https://www.gov.uk/government/consultations/supporting-1arge-scale-renewable-electricity-generation² Periodic Review 2013—Consultation on the variable usage charge and on a freight specific charge. Office of Rail Regulation May 2012—http://www.rail-reg.gov.uk/pr13/PDF/freight-charge-consultation-may2012.pdf

The renewables obligation (RO) annual sustainability report, covering biomass feedstocks used between April 2011 and March 2012, reported that 72.84% of solid biomass achieved or reported exempt from the greenhouse gas (GHG) lifecycle emissions saving standard, while 27.16% was reported as unknown. Wastes are exempt from the requirement to report their GHG emissions. The greenhouse gas lifecycle assessment considers emissions associated with feedstock cultivation, harvesting, processing and transport. Ash disposal is an issue for environmental permitting.

The Government are proposing that power plants of 1 megawatt capacity and above will, from October 2013, be required to meet the biomass sustainability criteria to receive support under the Renewables Obligation.

RWE announced in September this year that Didcot power station will close in 2013. It is a commercial decision for RWE as to whether it is feasible to convert to biomass.