We have lost that stability, and that’s a big problem because we need investment, and investment is damaged by political uncertainty.
It may appear that political risk in the UK has not risen much yet, but don’t be fooled. The problem is not that investors won’t go where there is uncertainty, but that if there is uncertainty they want paying for taking it on. We are complacent about still being relatively stable. In fact, we are rapidly reaching the point where the risk versus reward balance looks more attractive in places we look down on for their instability.
It gets worse. The government’s flight from taking on any investment risk itself has left it tied in knots on issues such as whether to be the counterparty for the contracts for difference regime. Thanks to the internet, and ParliamentTV, any investor worldwide could watch live as government ministers and Decc officials squirmed to get out of that one. Saying in evidence to the Select Committee that the idea of a government counterparty was just “bad drafting” did nothing but add a charge of incompetence to a growing reputation for political unreliability.
Consensus has slipped away but there is some agreement left, and what it says is that we can’t sweep the work of the past couple of years away and start again. We have to fix the problem.
With the party conferences coming up, some serious work has to be done on policy.
Conservatives: stop the Whitehall infighting that provides fuel for those who want to crack apart our future generation mix to benefit one source or the other. All our low-carbon scenarios have renewables and gas combining to replace coal, so get the Treasury and Decc together to say so.
Lib Dems: what is your real energy policy? It may have been non-nuclear when the party was far away from power, but in what sense are you a non-nuclear party if two successive Lib Dem Secretaries of State for Energy and Climate Change have spent huge political capital setting a financial framework for new nuclear investment?
Labour: stop floating energy policies with easy “return to the pool” headlines and get back to helping develop a workable long-term roadmap.
We have just a few weeks to turn a draft Energy Bill that has pleased no-one into one that contains not just the measures necessary to meet our needs, but the transparency and political accountability too.
We’ve been unlucky that the fault lines in energy policy have coincided with the faults lines in the coalition. It will take some serious work, but if we can rebuild the energy consensus across the three major parties – instead of two, as was the case before – we could make something positive out of the current debacle, as well as regaining credibility.
Janet Wood
This article first appeared in Utility Week’s print edition of 31 August 2012.
Get Utility Week’s expert news and comment – unique and indispensible – direct to your desk. Sign up for a trial subscription here: http://bit.ly/zzxQxx