Fossil Fuels: Prices

Department for Energy and Climate Change written question – answered on 28th January 2015.

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Photo of Graham Stringer Graham Stringer Labour, Blackley and Broughton

To ask the Secretary of State for Energy and Climate Change, what assessment his Department has made of (a) future changes in fossil fuel energy prices and (b) the implications of such changes for the calculation of the value for money of his Department's energy policies and alternative energy pathways.

Photo of Matthew Hancock Matthew Hancock Minister of State (Department for Business, Innovation and Skills), Minister of State for Portsmouth, The Minister of State, Department of Energy and Climate Change

We develop three fossil fuel price projections for use in policy making. These present a large range of potential future energy prices. Energy prices are monitored on an ongoing basis and updated annually.

The Levy Control Framework sets a limit on the support the Government can provide to the development of low carbon electricity. This has been set to 2020/21 and is detailed in the Annual Energy Statement, published in October 2014:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/371387/43586_Cm_8945_accessible.pdf.

Long term projections of fossil fuel prices inform this budget setting process and will continue to do so.

When setting these budgets, the Government considers a number of risks that could affect support costs, including the impact of lower wholesale prices. The Government takes potential risks to the LCF limits very seriously and will ensure consumers receive value for money from the schemes supported.

The recent fall in commodity prices exemplifies the need for diversity in the UK's electricity technology mix as a crucial element of reducing the risk imposed by fuel price volatility. Electricity Market Reform facilitates a portfolio approach to deliver this.

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