by Nigel Hawkins
The last few weeks have been busy times in the EU and UK energy sectors – and the next few months are unlikely to be any different.
Whilst the issue of UK energy policy elicits many strong – and often countervailing – views, there is one genuine constant, namely the widespread belief in a mixed energy policy. Of course, within that general consensus, there are polarising views as to whether such a policy should embrace nuclear power – and especially the construction of new nuclear-build.
Aside from the nuclear issue, the broad adoption of market principles, following privatisation some 20 years ago, has been generally beneficial, despite the sharp rise in energy prices of late – on the back of higher gas prices.
However, in recent years, the energy market has been progressively replaced by a raft of outside influences – ranging from EU targets to seemingly endless energy subsidies – which have seriously distorted market principles.
To what extent this policy is pursued in the forthcoming Energy White Paper, due to be published very shortly, remains to be seen. Its prime aim will be to kick-start new nuclear-build through various incentive mechanisms.
The reality, though, is that the White Paper, like its predecessors, is reacting to energy events, mainly in Germany and France.
A few weeks ago, the German government executed a massive U-turn whereby all the country’s nuclear plants are due to close by 2022.
Partly due to this policy, RWE, one of Germany’s two leading energy players, is rumoured to be selling its UK Npower operations. In addition its participation in the Horizon consortium – with E.On – to build new nuclear plants in the UK looks doomed.
In consequence, France’s EdF, of which its government owns over 80%, is now the only realistic investor in UK new nuclear-build. Its input into the White Paper is believed to have been considerable, especially in respect of setting a floor for the carbon price – which would suit it rather nicely.
The subsidy-boosted renewables sector is a major beneficiary of all these shenanigans, at considerable future cost to taxpayers, especially since it cannot – with the odd exception – deliver much-needed base-load power.
Indeed, Germany’s nuclear U-turn has been greatly welcomed by the renewables sector, which has been struggling of late in Europe, mainly due to the various cuts in subsidies.
In the 1990s, the Conservative government allowed the UK electricity supply to be dominated by foreign-owned companies, which now seems to have been a costly mistake.
Nigel Hawkins is a Director of Nigel Hawkins Associates which undertakes policy and investment research in the energy and water sectors.
