Take Caroline Flint, Labour’s shadow energy minister. Now she’s very clear on her policy, which would be to scrap Ofgem and return to an electricity pooling system, among other things. The GMB added its voice to the calls to scrap the watchdog this week, in a fit of indignation at proposed job cuts in gas distribution.
Whatever you think of Ofgem, the fact remains that it is internationally respected and the stable regulatory regime it has overseen has been a big plus point for investors. Tearing that up and starting again could push us down the league table of European investment options – which just might convince an investor in the Far East, say, to pick Germany over the UK. And that could be one less power station built.
Reintroducing the electricity pool could also affect investor certainty. There are many ways in which this could work, but the policy is light on detail. Would Labour return to the old system, which it scrapped in 1997? Or would it come up with a new mechanism? If so, what would that mean for companies’ profitability?
At least Flint knows what she wants. The parties in power seem less sure. A surprised John Hayes told delegates at a parliamentary meeting on biomass last week that his officials had informed him that morning of Defra’s decision to scrap support for three landmark energy-from-waste projects. Hardly an advertisement for joined-up government.
Then there’s the Energy Bill. As Ernst & Young points out in a scathing report this week, investors have been left hanging by the delay in setting a decarbonisation target. Lord Deben (formerly John Gummer) made a high profile and, for the government, embarrassing intervention in the debate, with a letter urging Ed Davey to set a target in 2014.
Infighting between Davey at Decc and George Osborne at the Treasury has led to the delay in setting the target; a political expedient with crushing consequences. In a terse letter to the Financial Times, Davey insisted that the government was legislating for a 2030 target “in 2016, at the same time as the fifth carbon budget, which covers 2030, is set”.
As for other things we don’t yet know – where to start? There’s the capacity market – what will it look like, how will it work, will it even happen? There’s nuclear new-build – anyone? – and the strike price negotiations. There’s the structure of feed-in tariffs.
At the moment, even after the publication of the much vaunted Energy Bill, there are far more questions than answers about the future of energy in this country. It doesn’t fill one with confidence, does it?
Ellen Bennett
This article first appeared in Utility Week’s print edition of 8th March 2013.
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