npower Electricity Market Reform Consultation Research: Industrial and commercial customers

Transcription

1 npower Electricity Market Reform Consultation Research: Industrial and commercial customers

2 Introduction At npower we feel that it s important that UK businesses are given a voice in the Department of Energy and Climate Change s consultation on the proposed UK Electricity Market Reform. To facilitate this, we have developed this comprehensive report that captures the views of businesses, through face-to-face discussions and a quantitative business survey. npower hosted a roundtable event for businesses where they were able to discuss their views and concerns on the future of the electricity market. The event, on Monday 14th February, brought together npower s energy and policy experts with Jeremy Nicholson, director of the Energy Intensive Users Group, to discuss the EMR with energy managers from a variety of sectors and leading energy consultants. We also conducted quantitative research with 60 of our industrial and commercial customers to further investigate the views of major energy users on the proposals outlined in the EMR. The following report summarises what was discussed at the event and details businesses views on the EMR, plus the results of our business research. It should be considered as part of the Department of Energy and Climate Change s statutory consultation on the government s preferred electricity market framework. John McElroy Director of Policy & Public Affairs npower npower 2

3 Contents EMR Customer Roundtable - qualitative insight Overview of the npower Electricity Market Reform customer roundtable Businesses and the Electricity Market Reform Carbon Floor Price Feed in Tariffs Capacity Payments Emissions Performance Standard Will EMR endanger the UK economy? What message do businesses want to send to DECC about the EMR? EMR Customer Survey - quantitative insight Overview of quantitative research into views on EMR Key Findings Results in full Next steps Appendix - Detailed Discussion Notes Event Details Event Participants Discussion Notes npower 3

4 Electricity Market Reform Customer roundtable - qualitative insight npower 4

5 Electricity Market Reform customer roundtable Overview of the npower Electricity Market Reform customer roundtable npower hosted a four hour roundtable on the government s Electricity Market Reform (EMR) consultation on Monday 14th February. The event brought together npower s energy and policy experts David Cockshott, director of industrial and commercial markets, and John McElroy, director of policy & public affairs with Jeremy Nicholson, director of the Energy Intensive Users Group, to discuss the EMR with energy managers from a variety of sectors and leading energy consultants, including: David Olivant Bernd Leven Bruce Toper Stuart Lea Matthew Harris Chris Collicutt Mark McGlinn Malcolm Lee Simon Russell Alison Meldrum Alastair Hutson Andrew Horstead Chris Hendrix ASDA BT GlaxoSmithKline UK Inenco MBNL PepsiCo Pret a Manger Sheffield Forgemasters Tata Steel Tata Steel Utilyx Utilyx Wal-Mart (Texas Retail Energy) The discussion was independently chaired by Sumit Bose, the respected former BBC journalist and presenter who is also the editor of Energy Live News. The aim of the roundtable was to provide businesses with a forum to discuss their views and concerns on the future of the electricity market, and to give them a voice in the EMR consultation. This section of the report summarises what was discussed at the event and details businesses views on the EMR, and should be considered as part of the Department of Energy and Climate Change s statutory consultation on the government s preferred electricity market framework. A short, ten-minute video of highlights from the roundtable also accompanies this document. npower 5

6 Electricity Market Reform customer roundtable Businesses and the Electricity Market Reform A full transcript of the discussion is included as an appendix at the end of this report. Please click here to view a short, ten-minute video of highlights from the roundtable event. What do businesses think of the Electricity Market Reform (EMR)? UK businesses welcome the timing of the consultation but believe that the focus should be on refining current energy policy, not reforming it; There is concern that proposals set out in the EMR will reduce the competitiveness of UK businesses in the global marketplace and their ability to reinvest capital back into their own company s operations; Many at the roundtable also felt that are too many carbon taxes in place and that using renewable energy is not adequately rewarded. Looking at the EMR proposals in detail 1. Carbon Floor Price Businesses feel that existing legislation around carbon is already complex and that adding to it will only create further confusion for businesses. There are already too many taxes and policies in place, we need to strip out the complexity. If the carbon floor price is introduced then we need to chop out the other carbon taxes. We do need regulation but we also need to retain a competitive energy market. Chris Collicutt, PepsiCo. The carbon floor price is wrong to me, especially the way the government is going about it. We are using a 19th century mechanism to solve a 21st century problem. Malcolm Lee, Sheffield Forgemasters. There is a persuasive argument that says internalising the cost of carbon is necessary, however, with current plans there will be four prices on carbon: Carbon floor price, Climate Change Levy, CRC and the Emission Trading Scheme, quite apart from all the renewable subsidies. How many times do we need to internalise the cost of carbon? The government needs to choose one option for regulating carbon to make it simpler for everyone involved. Jeremy Nicholson, Energy Intensive Users Group. npower 6

7 Electricity Market Reform customer roundtable 2. Feed in Tariffs Businesses are concerned about how the strike price for the two-way Contract for Difference option will be set; There is a belief that setting a strike price will take the UK energy industry back to a state-run monopoly rather than a free energy market. I would like to see a more market-driven approach, rather than a government-led approach. Chris Hendrix, Wal-Mart. 3. Capacity Payments Businesses are concerned about who will fund the capacity payments will this become another tax on business? Many did not understand why capacity payments are being proposed whenever there are already successful systems in place, e.g. National Grid s Short-Term Operating Reserve (STOR). Our experience of capacity payments in other markets is that they do not incentivise new investment, they just support existing investment. Chris Hendrix, Wal-Mart. Our concern is where the funding for the capacity payments will come from. Will this just be another cost that is passed onto end users? Simon Russell, Tata Steel. The reason for introducing a capacity payment has not been properly disclosed why are we doing this? Is it because there are gas storage issues? Because nuclear is inflexible? Or because we recognise that wind generation is unreliable? We already have a mechanism in place, why do we need a new one? That said, although intermittency is not a major problem right now, by 2020 it could be if wind power grows rapidly. Jeremy Nicholson, Energy Intensive Users Group. 4. Emissions Performance Standard Businesses are unsure why this has been included in the EMR and feel that it should be dropped from the EMR. I would like the emissions performance standard certificates scrapped. Jeremy Nicholson, Energy Intensive Users Group. npower 7

8 Electricity Market Reform customer roundtable Will the EMR endanger the UK economy? There is concern that by leading the worldwide charge on the move towards a low carbon economy, the UK government is dealing with a global issue at a national level. Businesses are afraid that this could damage the UK economy at a time when it is already fragile; Businesses are worried that extra levies applied to them in an effort to reduce the UK s carbon emissions will result in them becoming uncompetitive in the global marketplace. We are faced with a global problem that the electricity industry and Government will have seen coming for many years. Urgent action is now necessary and although a national response is required, it will not be sufficient. Suppliers, who are often global players, must take the lead and agree measures with Government that reflect the world consensus. Will this endanger the economy? The economy is already challenged by the cost of risk which will only increase if no action is taken. Mark McGlinn, Pret a Manger. Due to a lack of competitiveness the UK is becoming less capable of manufacturing to suit our requirements. Businesses need to look globally to BRIC countries to meet supply chain requirements. Malcolm Lee, Sheffield Forgemasters. You won t win business unless you are competitive, at what point will consumers say it s not worth me buying it now? As costs go up, as a business we look at how much our margins can be squeezed and at which point we pass on the costs. Matthew Harris, MBNL. The EMR could end up squeezing business costs to such a degree that we cannot afford to reinvest in our own sectors. Alison Meldrum, Tata Steel. The UK is the only EU country considering introducing a carbon floor price and, if anything, other EU governments take the opposite view in trying to overprotect their industrial sectors from higher charges. Jeremy Nicholson, Energy Intensive Users Group. npower 8

9 Electricity Market Reform customer roundtable What message do businesses want to send to DECC about the EMR? There are already too many taxes and policies in place in the UK energy industry the focus should be on simplification, not reformation; Businesses want more rewards for energy efficiency measures and using renewable energy sources; Businesses want more liquidity in the UK power markets. I would like to see more focus on and incentives for energy efficiency. Alison Meldrum, Tata Steel. The EMR will create a managed market that will drive volatility in and liquidity out of the UK market. From government we would like to see a unilateral global agreement or the UK will become uncompetitive. This is too much, too fast. Alistair Hutson, Utilyx. We want improved liquidity in the market. Bruce Toper, GlaxoSmithKline UK. In 2008 core and non commodity energy costs were split (%) 80:20. In 2011 this is now 50:50. In the very near future it will become 40:60, it is the Government s duty to stop this being happening. David Olivant, Asda. I would like a clear understanding of what constitutes success. If success with the current approach is security of supply, then it has been delivered. The government also needs to admit that the 2020 Renewable Energy target cannot be delivered and start being honest about it in public. Jeremy Nicholson, Energy Intensive Users Group. npower 9

10 Electricity Market Reform Customer survey - quantitative insight npower 10

11 Customer Survey Overview of quantitative research into views on EMR To further investigate the views of major energy users on the proposals outlined in the EMR, npower conducted quantitative research with 60 of npower s customers. Key Findings: What do businesses think of the Electricity Market Reform (EMR)? - 24% of respondents did not agree that the proposals of the EMR will help the UK to achieve its emissions reduction targets - 57% of respondents are concerned the proposals of the EMR may lead to an increase in energy bills for businesses - 48% of respondents think the proposals of the EMR will be complex and unwieldy for businesses - 24% of respondents do not think the proposals of the EMR will help raise the increased investment needed in low carbon generation Looking at the EMR proposals in detail - 55% of respondents think the carbon floor price element of the proposals will lead to an increase in energy bills for businesses - 20% of respondents think the feed-in tariffs proposed will encourage uptake of low carbon onsite generation - 20% of respondents think the targeted capacity payments proposed will impede the UK s attempts to meet its carbon emissions reduction targets - 19% of respondents do not think the emissions performance standard will help the UK meet its carbon emissions reduction targets npower 11

12 Customer Survey Results in full: To what extent do you agree or disagree with the following statements? Strongly Agree Slightly agree Neither agree or disagree Slightly disagree Strongly disagree The proposals set out in the EMR will help the UK to achieve its emissions reduction targets 0% 21% 55% 12% 12% I understand what the EMR proposals include 3% 15% 52% 18% 12% I am concerned the proposals of the EMR may lead to an increase in energy bills for businesses 40% 17% 41% 2% 0% The proposals of the EMR will be complex and unwieldy for businesses 25% 23% 50% 2% 0% The proposals of the EMR will help raise the increased investment needed in low carbon generation 5% 3% 68% 17% 7% The carbon floor price element of the proposals will lead to an increase in energy bills for businesses 33% 22% 45% 0% 0% The feed-in-tariffs proposed will encourage uptake of low carbon onsite generation 3% 17% 65% 8% 7% The targeted capacity payment proposed will impede the UK s attempts to meet its carbon emissions reduction targets The emissions performance standard will be instrumental in helping the UK meet its carbon emissions reduction targets 8% 3% 12% 12% 75% 66% 2% 10% 3% 9% npower 12

13 Next Steps Thank you for taking the time to read this document. We hope that you found it both informative and interesting, and that the Department of Energy and Climate Change will consider the views of the roundtable participants as part of the statutory consultation on the electricity market framework. We look forward to your response and should you have any questions or would like to talk to any of the roundtable participants, please contact John McElroy, Head of Policy and Public Affairs, by ing npower 13

14 Appendix Detailed discussion notes - npower Electricity Market Reform customer roundtable npower 14

15 Electricity Market Reform customer roundtable Event Details Location: Kingsway Hall Hotel, 66 Great Queen Street, London WC2B 5BX Date: Monday 14 February 2011 Time: 9.45am to 1.00pm Event Participants Sumit Bose David Cockshott Dr John McElroy Jeremy Nicholson Chris Collicutt David Olivant Bernd Leven Bruce Toper Stuart Lea Matthew Harris Mark McGlinn Malcolm Lee Simon Russell Alison Meldrum Alastair Hutson Andrew Horstead Chris Hendrix Roundtable Chair and editor of Energy Live News Director of industrial & commercial markets, npower Director of policy & public affairs, RWE npower Director, Energy Intensive Users Group PepsiCo ASDA BT GlaxoSmithKline UK Inenco MBNL Pret a Manger Sheffield Forgemasters Tata Steel Tata Steel Utilyx Utilyx Wal-Mart (Texas Retail Energy) npower 15

16 Discussion Notes Discussion Notes What does the EMR mean to you? Alison Meldrum Tata Steel The EMR demonstrates leadership from the government and I commend that, however, we do have some concerns about the cost implications. Bruce Toper GlaxoSmithKline UK The EMR is a good, positive move and this roundtable gives UK industry a chance to make a contribution to the development of the energy market. I agree that changes to the market are necessary, but the devil is in the detail. Simon Russell Tata Steel There are big challenges ahead due to ageing generation plants and the climate change agenda. However, I have seen too many initiatives, e.g. EUETS, and at a customer level, there have been too many shifts in terms of legislation and investment. The big concern /question is, will this work? Are businesses being heard? Chris Collicutt PepsiCo There is a real lack of incentives for industrial end users from government to drive investment in the energy market should we invest in energy efficiency or renewable energy? When companies are making decisions over capital investment in energy they can see returns from efficiency projects, but not from renewable energy. We need a better mix to enable businesses to invest in both. Carbon benefits and incentives are needed for the right pace of change, i.e. end users need to be able to have reportable carbon savings from utilising renewable energy. Do you want renewable energy? Malcolm Lee Sheffield Forgemasters No, it doesn t matter to my business how much renewable energy is produced in the UK as it is not suitable for our business; we need power instantly and wind farms aren t necessarily able to respond immediately. We require secure, reliable energy that s there when we need it. We are an exporter and are up against competition from Korea, Japan and developing countries. Any unilateral increases in UK energy prices impacts on our competitiveness on a global front. npower 16

17 Discussion Notes What do consultants think of the EMR? Alistair Hutson Utilyx Through the EMR, the government is talking about encouraging UK investment in an affordable environment. They talk about security of supply and living in a decarbonised world by 2050 is that even possible? Security of supply and affordability should come first, not decarbonisation. Chris Hendrix Wal-Mart At Wal-Mart, we want to be 100% renewable but we need it to be cost-economical for our customers. Our key concerns are: 1. Who will end up paying for the EMR? 2. Is the legislation understandable to end users? There are too many UK government groups looking at energy, it is too complex. Is now the right time for looking at EMR and is the timescale too fast? Jeremy Nicholson Energy Intensive Users Group The timing is unavoidable. The EMR 'had' to come in with the new government. However, we are going over the same old issues again as there is still a trade off between security of supply, carbon and affordability. There is a recognition that this will drive costs up over the next 20 years. If the government is serious about a sustainable low carbon approach, it needs to do it in a cost effective way. A fixed renewable target is difficult - the future is low carbon, not no carbon. How has the energy industry got to this point what have the generators been doing about it? John McElroy npower npower effectively has a new fleet, because we have replaced our asset base. We took the position to have the most efficient fleet possible. The dilemma investors now face is on payback versus low carbon. npower 17

18 Discussion Notes How has the energy industry got to this point what have the generators been doing about it? (continued) Simon Russell Tata Steel The UK is again trying to take a lead in low carbon economy, when history tells us that others won t always follow. David Olivant ASDA Overcapacity is not just due to recession on its own, it is also due to huge energy efficiency drives taken by businesses. Retailers are already spending the equivalent cost of opening one new store a year on energy reduction measures in the UK. The CRC means that we need to find extra energy efficiency measures from nowhere.it is all stick and no carrot. Are you worried about the outcome of the EMR due to the recent changes to the CRC legislation? ALL ALL Yes Jeremy Nicholson Energy Intensive Users Group There is a persuasive argument that says internalising the cost of carbon is necessary, however, with current plans there will be four prices on carbon: 1. Carbon floor price; 2. Climate Change Levy; 3. CRC; 4. Emission Trading Scheme; quite apart from all the renewable subsidies. How many times do we need to internalise the cost of carbon? The government needs to choose one option for regulating carbon to make it simpler for everyone involved. I don t how businesses can make a UK investment decision with so many balls up in the air. If I were a business I would hold off making any investment decisions in the UK right now how can they make multi-billion pound decisions without realistic legislative incentives? npower 18

19 Discussion Notes Has industry been consulted on the EMR? Malcolm Lee Sheffield Forgemasters We do engage with government quite regularly but the issue is whether or not they listen to us. The government has procrastinated over new nuclear build and while that procrastination was going on, things have changed. The world has moved on. Jeremy Nicholson Energy Intensive Users Group DECC is almost hostile to industry remaining in the UK as it is not part of its agenda. It wants to reduce energy consumption and decrease carbon emissions so if industry goes overseas, it naturally makes reaching the objective easier. The Department for Business, Innovation and Skills are naturally sympathetic and Treasury are concerned because if industry goes overseas they miss out on corporate tax revenue. There is no explicit Impact Assessment for the industrial sector in the EMR or Carbon Floor Price consultations Alison Meldrum Tata Steel This is illustrated in the Carbon Floor Price section in the EMR document, which simply says that any costs incurred by industry can be passed through to customers. Carbon Floor Price is it a good idea? Chris Collicutt PepsiCo Yes it is a good idea, it gives stability and provides a trigger for investment. Bruce Toper GlaxoSmithKline UK As an end user I want to be able to count carbon from a wind turbine I have built, however, I can t count it because of the carbon cost of deliver to my site. Chris Collicutt PepsiCo Renewable energy is expensive to deliver. If we really want a low carbon economy we need to make it competitive for end users, so they can count the carbon of renewable energy. Why would I invest in renewable energy if I can t count it? If you want to drive low carbon economy you ve got to drive demand which ultimately comes from end users. Even though I use renewable energy my carbon footprint doesn t change. Malcolm Lee Sheffield Forgemasters The carbon floor price is wrong to me, especially the way the government is going about it. We are using a 19th century mechanism to solve a 21st century problem. Bruce Toper GlaxoSmithKline UK There is an appetite from industry to invest more in renewable energy but there needs to be a clear benefit. npower 19

20 Discussion Notes Do customers care about low carbon sourcing? Chris Hendrix Wal-Mart Our customers are more concerned about the best cost, rather than low carbon sourcing. In stores where the green agenda is higher, we do focus on renewable energy source, but this is very localised. The right thing to do is to become carbon efficient. Our focus is on keeping costs down for customers, we do that by keeping our own costs down. Primarily through energy efficiency and secondly through renewable technology, but only where it makes commercial sense. David Olivant ASDA The government needs to make the playing field level for all retailers. For example, we already know that putting doors on chiller units saves energy but it adversely impacts the customer shopping experience because it takes them longer. So if the government made it mandatory for all retailers to have doors on fridges then we wouldn t be competitively disadvantaged no one wants to go first. Mark McGlinn Pret a Manger The principle that we should pay for what we pollute is fundamentally new and correct. It encourages us to form an accurate and fair view of the cost/benefit of a product and its associated risk and make decisions based upon it. It forces us to not only think of but act according to the common good. The fundamental driver behind the EMR is the need to respond to what is a global issue. Although Pret doesn t have a dedicated energy management department, we have sought to analyse and understand our energy usage with energy usage reduction trials being run in several shops. The challenge we face is whether to lead or be lead. We found for instance that keeping entrance doors closed is more energy efficient but it impacts negatively on the customers ability to get in and out of the shop quickly during peak trading hours. So the question is how do we respond to this? We are still working on a solution and perhaps there is both a technical and an awareness answer. We do believe strongly that the retail sector needs to work together closely and share best knowledge to come up with agreed practices that work. David Cockshott npower Should the market be refined or reformed? npower 20

21 Discussion Notes How do your customers feel about nuclear as a source of low carbon generation? Simon Russell Tata Steel The trading market is divorced from energy generation. I cannot identify the source of a MW I purchase. If the source was labelled at the point of purchase, would businesses demand a premium for specific sources or could the reverse happen, could green energy become budget energy with a premium placed on brown energy sources? Jeremy Nicholson Energy Intensive Users Group The EMR is not a genuine reform. Instead, the four elements are very disparate, seeking to fulfil different objectives, yet overlapping one another at the same time. Bernd Leven BT The existing carbon schemes need to be reviewed and possibly merged how can we simplify the existing legislation? Can we give customers a choice of low carbon energy sources e.g. premium renewable or nuclear, whilst creating transparency in the scheme to avoid double counting of carbon benefits? Would BT make a decision to buy from a certain source? Bernd Leven BT All BT s UK consumption is from renewable energy or GQCHP and we echo this outside the UK. But the schemes across Europe vary and in the UK there is no incentive to use renewable energy as the CRC and GHG reporting guidelines do not take this into account. Are customers willing to pay a premium for green? Alistair Hutson Utilyx Yes but we need to wait and see how the political landscape develops. Stuart Lea Inenco For most, clients see green as a nice to have, but with current economic pressures not at a price premium Chris Hendrix Wal-Mart Many are confused about the difference between low carbon energy (such as new nuclear) and green energy. The challenge is how we separate the two, as nuclear carries negative connotations for many customers. npower 21

22 Discussion Notes Looking now at Feed in Tariffs, who should set the strike price for the proposed Contract for Difference option? Malcolm Lee Sheffield Forgemasters It is all about risk management who will pick up the risk? Chris Hendrix Wal-Mart The set strike price will take the UK energy market back to a staterun monopoly Jeremy Nicholson Energy Intensive Users Group The key thing is to what extent government can intervene? The energy industry is already decarbonising naturally due to shift to gas. Is the market being skewed to allow the introduction of new, smaller players? Jeremy Nicholson Energy Intensive Users Group We still need to build new plant and larger energy suppliers are often best placed to do this. Bernd Leven BT BT is being asked by investors can they use our land for renewable energy such solar and wind turbines. We have an objective to have a ¼ of our consumption powered by wind turbines by Chris Hendrix Wal-Mart While Wal-Mart is interested in PPAs and possible JVs we don t build generation assets. We sell beans and socks this is what is core to our business, not energy. What do you think of the Capacity Payment mechanism do we need it or not? David Cockshott npower I m not sure if it is needed as National Grid s demand side mechanisms (e.g. STOR) are already an effective mechanism. Simon Russell Tata Steel Our concern is where the funding for the capacity payments will come from. Will this just be another cost that is passed onto end users? Chris Hendrix Wal-Mart Our experience of capacity payments in other markets is that they do not incentivise new investment, they just support existing investment. npower 22

23 Discussion Notes What do you think of the Capacity Payment mechanism do we need it or not? (continued) Jeremy Nicholson Energy Intensive Users Group The reason for introducing a capacity payment has not been properly disclosed why are we doing this? It is because there are gas storage issues? Because nuclear is inflexible? Or because we recognise that wind generation is unreliable? We already have a mechanism in place, why do we need a new one? That said, although intermittency is not a major problem right now, by 2020 it could be if wind power grows rapidly. John McElroy npower There are tools in place to solve this already such as demand side participation and smart grid, so we need to refine the current system rather than total reinvention. The EMR needs to look at supply and demand together. Will the EMR endanger the UK economy? Jeremy Nicholson Energy Intensive Users Group It is already impacting energy intensive users, they are less competitive on the global scale. We expect to see a 70% increase in energy costs by 2020 simply because of climate policies. By 2030 the UK carbon price could be 70 per tonne. For domestic customers the cost of energy could double by The UK economy is not a priority for DECC. Mark McGlinn Pret a Manger We are faced with a global problem that the electricity industry and Government will have seen coming for many years. Urgent action is now necessary and although a national response is required, it will not be sufficient. Suppliers, who are often global players, must take the lead and agree measures with Government that reflect the world consensus. Will this endanger the economy? The economy is already challenged by the cost of risk which will only increase if no action is taken. David Olivant ASDA The challenge we are facing is to lead or be led. Sometimes it is better to go through a minefield second successfully. Malcolm Lee Sheffield Forgemasters Due to a lack of competitiveness the UK is becoming less capable of manufacturing to suit our requirements. Businesses need to look globally to BRIC countries to meet supply chain requirements. npower 23

24 Discussion Notes What energy costs can UK industry absorb before a decision is made to move manufacturing to a BRIC country? Malcolm Lee Sheffield Forgemasters We are operating in two markets: A short term market (2-3 months) A long term market (3-4 years) The short market isn t a problem as we know what energy costs will be, however, we don t know what the energy price will be in four years time; It therefore becomes very risky for a business to accept, say a 40m contract that carries a 10m energy risk. Matthew Harris MBNL You won t win the business unless you are competitive, at what point will consumers say it s not worth me buying it now? As costs go up, as a business we look at how much our margins can be squeezed and at which point we pass on the costs. Alison Meldrum Tata Steel The EMR could end up squeezing businesses costs to such a degree that we cannot afford to reinvest in our own sectors. Jeremy Nicholson Energy Intensive Users Group The UK is the only EU country considering introducing a carbon floor price and, if anything, other EU governments take the opposite view in trying to overprotect their industrial sectors from higher charges. Is it a good thing that the UK is leading on this? Chris Collicutt PepsiCo There are already too many taxes and policies in place, we need to strip out the complexity. If the carbon floor price is introduced then we need to chop out the other carbon taxes. We do need regulation but we also need to retain a competitive energy market. As a comparison the introduction of road fuel duties have helped drive fuel efficiency in Europe and it is simple and granular. Whilst not necessarily popular, that is more a question of its level rather than the mechanic. npower 24

25 Discussion Notes What s the alternative to the EMR? Stuart Lea Inenco Our clients want price certainty. They are aware that something nasty is coming but they don t understand how it will impact costs.. What message would you like to give to DECC? Bruce Toper GlaxoSmithKline UK We want improved liquidity in the market. David Olivant ASDA We want simplification of the existing energy policy. If the measures outlined in the EMR come to fruition then the existing taxes need to be removed. Malcolm Lee Sheffield Forgemasters The government should not expect industry to subsidise energy that it can t use. Alistair Hutson Utilyx The EMR will create a managed market that will drive volatility in and liquidity out of the UK market. From government we would like to see a unilateral global agreement or the UK will become uncompetitive. This is too much, too fast. Andrew Horstead Utilyx The EMR will create too much uncertainty. There is already too much risk in the energy market for businesses. And with the added risk of slippage on key energy legislation in the next couple of years, this makes for an uncertain world. Alison Meldrum Tata Steel I would like to see more focus on and incentives for energy efficiency. Chris Hendrix Wal-Mart I would like to see a more market-driven approach, rather than a government-led approach. npower 25

26 Discussion Notes What message would you like to give to DECC? Jeremy Nicholson Energy Intensive Users Group I would like a clear understanding of what constitutes success. If success with the current approach is security of supply, then it has been delivered. Looking at the EMR in detail: 1. On capacity payments, I would like this to be left alone 2. I would like the emissions performance standard scrapped 3. On a carbon floor price, I believe that multiple carbon taxes will ruin us economically. The govt needs to reduce the CCL and scrap the CRC. 4. Finally, the government needs to admit that the 2020 Renewable Energy target cannot be delivered and start being honest about it in public. David Olivant ASDA I have been in the industry since 2008, In 2008 core and non commodity costs were split (%) 80:20. In 2011 this is now 50:50. In the very near future it will become 40:60, it is the Government s duty to stop this being realised. npower 26