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Iberdrola chief warns over Energy Bill delays

THE chief corporate officer of Iberdrola in the UK has warned any delays to the Energy Bill will result in several shovel-ready projects being held up further.

WINDS OF CHANGE:  Keith Anderson, who also heads up ScottishPower Renewables, warned a lack of clarity has brought investment in power plant developments to a halt. Picture:  Chris James
WINDS OF CHANGE: Keith Anderson, who also heads up ScottishPower Renewables, warned a lack of clarity has brought investment in power plant developments to a halt. Picture: Chris James

Keith Anderson, who also heads up ScottishPower Renewables, believes there are between 10 and 15 power plant developments with planning consent in the UK which could provide a huge boost to the beleaguered construction sector.

But utility companies are reluctant to invest the hundreds of millions of pounds in new plants until they have clarity from policymakers on how the industry's funding mechanisms will work.

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While Mr Anderson was keen to point out ScottishPower agrees with much of the policy which has so far been revealed in the Energy Bill, he is wary that as more details emerge this year the timetable – of the legislation starting to be introduced towards the end of next year – may slip.

He said: "At principle level we have no issues [with the bill] and it is good to see it moving forward.

"The issue now is to get clarity on each of the parts then our view is to move forward as quickly as possible.

"There is a huge opportunity here to use the energy sector to help boost the UK economy.

"We have two fully consented sites. One next to Damhead in Kent and one at Cockenzie [in East Lothian]. Those are fully consented and there are probably 10 to 15 sites like that across the sector but no-one is building as right now there is no clarity.

"Give the clarity now and let us understand the mechanism and you will see the investment come through in an orderly fashion."

Mr Anderson said that the industry is keen to see how the move from the renewables obligation scheme to contracts for difference, which includes nuclear, will affect the incentives for investing in new power generation.

Negotiations on how the contracts for difference will be regulated and how any organisation overseeing the process is funded are ongoing.

Another area where the detail is still to come out is over capacity payments where utility companies are paid for the capacity they make available as well as what they supply.

Mr Anderson said forms of the payment have been around under different guises for much of the time since the market was deregulated in 1990.

The UK Government has signalled it intends to offer capacity payments through an auction process where companies will tender to provide a certain amount of power in return for a level of incentive.

Mr Anderson said: "Our view is the earlier we do it the better as we want to start that investment coming forward as quickly as possible."

ScottishPower has already committed to spending £3.5 billion by the end of 2014 in projects ranging from grid infrastructure to onshore and offshore wind capacity.

Mr Anderson said that investment ripples down the supply chain to a number of other industries from consultants and lawyers to contractors and manufacturers.

He also believes the investment in Scotland in port facilities and infrastructure to encourage renewable energy companies to locate here is going in the right direction. He said: "We would always say do it better, do it faster.

"If you do that port facility it gives confidence to the manufacturers that these projects are going to happen which gives them the confidence to invest."

Along with its commitment to onshore and offshore wind Mr Anderson confirmed the company retains its faith in the marine and tidal sector.

It is working with Hammerfest in the tidal arena and Pelamis wave devices with both machines installed at the European Marine Energy Centre in Orkney.

Energy uncertainties

Contracts for difference (CfD) are aimed at encouraging nuclear and wind power generation by stabilising returns to energy companies.

But the Government has yet to set the strike price on the CfDs.

If the price of electricity falls below the strike price, generators will be compensated, but if it goes above the difference will be returned.

There might initially be variations in the strike price between energy technologies.

Detail is still to emerge on the operation of the capacity mechanism, where utility companies are paid for the electricity they make available as well as what they supply. One issue is whether to restrict payments to new power plants.

This could lead to companies shutting down older generation, hitting capacity. But if older energy assets are included, the scheme could be criticised for handing a windfall to the industry.

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