CBI leader calls for delivery on climate targets
Walk into a room hosting an energy policy event and what do you see? A mass of dark suits, familiar faces, familiar arguments and a slight sense of déjà vu. But although a discussion of the Energy Bill this morning at the CBI ran true to form, failing to shed much light on key questions, it also illustrated a striking agreement between business and government over what the bill needs to deliver. As chaotic announcements about sudden changes to energy policy once more hit the headlines, the question is whether that’s really going to happen.
CBI says: no more room for same old, same old
In his speech, CBI deputy director-general Neil Bentley seemed rather wearied. He kicked off by saying:
“Giving energy policy speeches can sometimes feel like being stuck in a time warp. Because I’ve been giving versions of this speech for about four years now”
In 2009 the CBI published a report on electricity market reform called “Decision Time”, followed in 2010 by a report called ” No Time to Lose“. If the CBI put out a report, the title, said Bentley, would need “to make Malcolm Tucker blush”.
In the light of Ofgem’s report about a potential squeeze on UK energy supply over the next few years, there is little room for more theoretical analysis. Bentley’s key message was the need to “stop arguing over the energy mix” and create a secure environment where investors in a wide variety of energy technologies want to invest.
Taking the hot air out of emissions reduction
As frequently happens in these discussions, the science of climate change doesn’t really rate a mention. But that’s not really the point. While sections of the media may continue to focus their energy on undermining the science of climate change, in the practical world the need to reduce emissions is an accepted fact. The CBI’s call is for “less politics, more policy”- in other words, we’ve got the targets, now get on with it.
Despite repeated claims by sections of the media and some politicians, ministers and industry seem well aware of the reality that shale gas is not expected to bring down prices over the next few years. Bentley said:
“…the 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.”
Ed Davey – busting myths?
The event was billed as one where energy minister Davey would correct myths about the energy bill. In the end, there didn’t seem much for the media to get excited about in his speech – which largely focused on the technical details like reform of the contracts for difference support measure, keeping investors on track before the reforms come in, and negotiations over the strike price for nuclear power.
This is important stuff for the investment community – and the speech responded to some signficant criticisms. These details may also have a big impact on how much the whole thing ends up costing. But in the short term, it is unlikely to set the world on fire for anyone not buried in the details of energy investment.
Davey met yesterday with the quad: Cameron, Clegg, George Osborne, and Lib Dem chief financial secretary, Danny Alexander, about the energy bill. But today he refused to give any information on whether a much-contested 2030 power sector decarbonisation target will be included in the bill. Government advisor the Committee on Climate Change has strongly recommended that it needs to be if the UK is to avoid busting the legally binding targets in the climate change act.
The biggest story of the day is an announcement made yesterday by David Cameron that energy companies will be ‘forced’ to put consumers on the lowest tariff. This morning, it appears that the policy is not after all confirmed and Cameron may have ‘misspoken’. Suffice to say, investors seeking certainty in energy policy are unlikely to be impressed.
At the CBI event this morning, one speaker described the energy bill as “an opportunity of a lifetime”. That’s a line we’ve heard before – and it seems slightly less impressive given the number of energy bills that have passed through the House over the last few years.
But the need to reduce reduce emissions from the system and the approaching squeeze on energy supply means that the same old speeches aren’t going to hold water for much longer.