Policy shifts have damaged investor confidence in the energy sector

Opaque process has spooked investors, according to the Energy and Climate Change Committee

The Government's offshore wind announcement has been welcomed by green groups

 

The ‘greenest government ever’ has been criticised by the Energy and Climate Change Committee for denting investor confidence in the UK’s energy sector.

In a report published today, the committee claims that a series of sudden policy changes since the General Election have left investors wondering what will come next.

This creates reluctance to invest in long-term energy infrastructure at a time when, according to Committee Chair Angus MacNeil, ‘billions of pounds of investment is needed in order to replace ageing energy infrastructure, maintain secure energy supplies and meet our legally-binding climate change targets.’

Since his re-election in May, David Cameron has maintained that his government is environmentally progressive. But at the same time, the Government has cut support for onshore wind and solar, brought the ‘Green Deal’ to a close and backtracked on carbon capture and storage. The changes have sparked significant criticism within the environmental sector.

The decision-making process on these policies has been opaque, exacerbating investor unrest and raising serious questions about the government’s commitment to achieving established energy targets.

Since the Department of Energy and Climate Change estimates that UK electricity generation will require £100bn in investment before 2020, the approach taken in the last six-months has already dangerously slowed progress.

But the committee emphasises that that the UK can  begin to restore its reputation for ‘stable and predictable policy development’ if it adheres to the following policy recommendations:

  • Provide more clarity about the application of existing policy mechanisms, especially in relation to planning for Contract-for-Difference auctions and the Levy Control Framework.
  • Create a ‘credible long-term vision for the UK’s energy system’, through the ‘Carbon Plan’ for the development of the fifth carbon budget.
  • Ensure that the development of the ‘Carbon Plan’ is transparent, involves the investment community and has cross-party support.
  • Retain enough flexibility to respond to technological advances.
  • Provide greater clarity, in particular, about the management of energy transitions and the ‘glide plan’ out of subsidies.

MacNeil also called for every policy development in this area to be subject to Investment Impact Assessments ‘to ensure that new policies don’t inadvertently discourage the investment that we desperately need.’

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