CBI: “Less politics in UK energy policy”

The Government must provide greater certainty in energy policy to help investors boost growth and provide secure low-carbon power, the CBI Deputy Director-General has warned.

In a speech to business leaders in London, Dr Neil Bentley said: “Energy investment is as much about growth as it is about secure, low-carbon power. Giving energy policy speeches can sometimes feel like being stuck in a time warp. While we support the Government’s direction of travel, the speed of progress is pretty frustrating.

“The energy bill is a once-in-a-generation opportunity, to boost our economy as well as head off our energy challenges. To grab that opportunity before it is too late, we need less politics, more policy.”

Energy and Climate Change Secretary Ed Davey also spoke at the event. It was widely reported that Davey was called into a special meeting with the four most senior Coalition politicians yesterday in order to address numerous issues surrounding the UK’s energy policy. One such issue is the Treasury’s apparent willingness to back gas over all other generation technologies.

Speaking on the UK’s new commitment to gas, Bentley said: “All the evidence points towards a balanced and diverse energy mix as the most cost effective pathway to decarbonisation. This includes new nuclear, new renewables, new carbon capture and storage and new gas.

“Government is right to encourage safe shale gas extraction as it makes sense to maximise the amount of energy we can produce at home at a reasonable cost. But gas alone isn’t the answer.

“Most modelling shows future European gas prices rising, with or without an influx of unconventional gas, and so from both a cost and a security perspective, a mixed portfolio of generating technologies looks favourable.

“So let’s stop arguing over the energy mix and focus on attracting investment to create jobs and growth as quickly as possible.”

During his speech Bentley outlined the three highest business priorities for the UK energy bill. First of all, the CBI is concerned there is too much confusion over the total amount of money available for future incentive payments for renewables after the current 2015 definition. It is rumoured that the Treasury is pushing for a much tighter levy control framework to be introduced in 2015, severely reducing available subsidies.

The CBI is also concerned about how the proposed capacity mechanism will ensure security of supply. Bentley argued that more information is required to ensure companies can make a sound decision on what to do with existing plants.     

Finally, the CBI is in favour of introducing stringent carbon targets in the energy bill. Bentley said: “Let me be clear: the CBI strongly supports the Climate Change Act and the carbon budgets. The energy bill must deliver the pace of decarbonisation required to achieve them, which means that the levy control framework and the delivery plans must be set with them firmly in mind.

“This link to the existing Climate Change Act targets should be enshrined in the energy bill. But when we ask financiers what they need to help them make investment decisions, they don’t mention more targets. What they’re crying out for is the substantive policy detail I’ve set out.”

Bentley added: “We are seeing UK energy policy get increasingly political. Are you for green or for growth? Are you for renewables or for gas? Fruitless debates over these false choices can seem like they’re just noises off, but they really matter.

“With every new story that adds to the sense of uncertainty, I hear of more phone calls from overseas head offices to UK executives asking whether it is worth putting further work into scoping out possible investments in the UK.”

Ed Davey moved to quell the fears expressed by the CBI by promising that the upcoming energy bill would unlock billions in energy infrastructure investment. In a statement responding to the CBI, he said: “Low carbon is a fast growing sector, where we know there are shovel-ready projects ready to create jobs and inject investment into local economies up and down the UK. This vital infrastructure will power our economy and keep energy affordable for decades to come.

“The coalition is absolutely committed to getting these reforms right, through legislation and through the signals we send.  We have listened to investors and today have set out further measures to provide the certainty they need to make decisions that will benefit us all.” 

The Minister also hinted that the Government was strongly considering introducing UK carbon targets for the power sector, stating: “A strong case has been made by many investors in energy infrastructure for a decarbonisation target range for the power sector.  Such a range would make clear our continued commitment to our climate goals”.