First published in the Quoted Cleantech Newsletter March 2010. Copyright Cleantech Investor Ltd. 2010
by Nigel Hawkins
Whilst opinion polls show that the UK Conservative Party’s longstanding lead is being hauled in, it is very likely that it will be the major party in the next government, although the odds on a coalition government have narrowed sharply in recent weeks.Given the dreadful state of the UK’s public finances, it is most unlikely that any incoming government will give the highest priority to promoting renewable energy projects – despite the lack of generation capacity.
To date, the Conservative Party has been far from forthcoming in setting out its policies on a raft of economic issues: its energy policy is also not clear. But the party has sought to emphasise its green credentials and has successfully conveyed an image of caring for the environment. However, this perception was created during the good economic times, which are now a distant memory.
More specifically, an incoming Conservative government would presumably pursue initiatives to boost the UK’s generation capacity, with much of this effort directed towards growing the contribution to electricity output made by renewables. Hence, it is probable that existing subsidies for renewables generation, operating mainly via the ROC system, will endure.
In principle, too, an incoming Conservative government would probably retain the ‘banding’ system of renewables subsidies, which implicitly recognises that some technologies are reasonably straightforward – onshore wind being an obvious example – and some, such as wave power, are inherently far more challenging.
In recent months, the current government has been focusing on its offshore wind development policy, for which it has set desperately ambitious targets. There must be real doubt as to whether a Conservative government would be as aggressive in driving ahead this technology, especially since many energy experts have raised serious doubts about its financial viability.
There is greater clarity about the Conservative Party’s stance on micro-generation. It has stated that it supports ‘small providers, including homes and businesses, producing energy for their own use, using a variety of methods from combined heat and power (CHP), to wind and photovoltaic power.’
Significantly, it has endorsed the principle of ‘feed-in-tariffs’, by which people are paid for the energy they produce. Whether micro-generation will make a material contribution to the UK’s generating requirements is a moot point.
Less clear is the Conservative Party’s views on nuclear power. Of course, it recognises that nuclear generation makes a major contribution towards emissions reductions, and has previously confirmed that it would not prevent the completion of any nuclear plants that were under construction when it entered office. But, assuming that it secures a ruling majority within the next few months, a Conservative government would have to decide whether to continue with the nuclear policy inherited from DECC.
Aside from its aim to abolish the Infrastructure Planning Commission, doubts persist on several issues, notably the commitment of potential nuclear investors, how new nuclear plant should be financed – many large energy companies are heavily indebted – as well as concerns on both designs, notably the Westinghouse AP 1000, and waste.
Environmentalists will also ask probing questions about fossil fuel plants, and especially the cause célèbre at Kingsnorth: E.On may eventually decide to abandon this project.
It is likely, too, that consumers will feature prominently in any Conservative Party energy policy, especially since domestic power prices are set to rise, possibly quite steeply. The UK’s energy watchdog Ofgem, too, may also undergo certain changes: it is being widely criticised for being ineffective in protecting consumers.
Assuming the Conservative Party does win the forthcoming General Election, there will undoubtedly be changes – and many energy executives are very anxious to know what they will be.
Nigel Hawkins ( \n This e-mail address is being protected from spambots. You need JavaScript enabled to view it ) is a City investment analyst specialising in energy issues.
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