By Estelle Shirbon
LONDON (Reuters) - A Conservative government would impose a carbon tax on electricity generation to create a clear incentive for long-term investment in renewable energies, the party said on Friday.
Unveiling their energy strategy ahead of an election, the Conservatives said they would reform an existing Climate Change Levy on power supplies, instead imposing a levy on the carbon content of electricity production.
"Ultimately the cost of achieving a diverse and resilient energy system has to be paid for by consumers," the party said in a strategy document launched by leader David Cameron.
"Reducing that cost depends on incentivising the necessary investment in the most economically efficient way," it said.
French utility EDF, a potential builder of nuclear power plants in Britain, welcomed the plan. It and other power firms had long said that volatile prices in the European Union emissions trading scheme were a brake on low-carbon investment.
The Conservatives have been in opposition for the past 13 years but they are hoping to eject the Labour Party and come back into office by winning a national election expected on May 6.
Their proposals were mostly in line with advice from energy regulator Ofgem, which called last month for urgent reform to ensure energy supplies were secure and emissions targets were met as coal- and oil-fired power plants close.
Under the Conservative plan, the carbon levy would begin at a low rate, set by the Treasury in consultation with the industry. It would rise over time and would be in place for at least 25 years, matching the lifetime of capacity investments.
Utilities would only pay the levy if the European trading scheme carbon price fell below the level set by the Treasury -- thus, the levy would amount to a floor price in Britain.
NUCLEAR, WIND
Some industry executives have warned that Conservative plans to limit the powers of an infrastructure planning body set up by Labour could delay or even derail the construction of new nuclear plants.
In their energy strategy document, the Conservatives sought to show strong commitment to long-term investments in nuclear power. They said planning decisions would be approved by parliament to protect them from reviews and delays.
In a separate proposal, they said they would create incentives for power firms to invest in new capacity, such as gas-fired plants which are relatively quick and cheap to build.
Generators are reluctant to make these investments because of an expected boom in wind power capacity in the North Sea over the coming decades. They fear that gas-fired plants would be under-utilised except during troughs in wind output.
The Conservatives proposed addressing this by empowering the energy regulator to guarantee payment for new capacity.
"In effect, the regulator would be able to make long-term commitments on behalf of consumers to provide certainty of payment for new capacity. This would allow investments to be planned in advance," the strategy document said.
(Additional reporting by Kwok W. Wan and Daniel Fineren, editing by Anthony Barker)
(c) Reuters 2012. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
