Archive for May, 2015

With the dust settling on a surprisingly convincing Conservative election victory, the UK’s energy policy will now be delivered by a party with a significant climate sceptic wing and the absence of a green-hued Coalition partner, the Liberal-Democrats.

Energy trilema remains

The UK’s long-term energy goals will continue to be improving energy security, ensuring energy is affordable and reducing carbon emissions through low-carbon generation. The big question is how these three aims will be balanced, with a large segment of the Conservative party heavily sceptical of energy decarbonisation and the green agenda.

However, the announcement that Amber Rudd, an advocate for action on climate change, is taking over as Energy & Climate Change Secretary, along with the removal of the anti-windfarm/solar Eric Pickles as Communities Secretary, means that Tory climate sceptics have been kept away from key energy and environment positions.

The result is that there will likely be relatively little change in a slightly contradictory energy policy that will continue to prioritise decarbonisation while also blocking onshore windfarms and paying too little attention to energy efficiency.

Energy prices

More of the same is the most likely situation, with low carbon taxes and other non-energy costs (distribution, transmission etc) continuing to be the main driver of electricity price increases while the oil price remains depressed.

While Labour’s threat to abolish Ofgem has disappeared, the regulator will remain under pressure to increase competition and rebuild trust between consumers and the big 6 energy suppliers.

One election promise that the energy industry won’t be sorry to see the back of is Labour’s misguided (and rather pointless) pledge to fix energy prices.

Fracking future

One industry that will have cheered the election result is shale oil and gas extraction. The Conservatives have been vocal supporters of new domestic fossil fuel sources in the shape of shale fracking, which offers improved energy security and (possibly) reduced costs for consumers. There remain considerable questions about the commercial and social viability of fracking however, with community opposition set to exceed anything experienced by the onshore wind industry.

Despite these reservations, the push for fracking is set to increase during the next parliament, though rural and environmental group opposition could cause both the fracking industry and government a few problems along the way.

Other energy issues

While Amber Rudd and colleagues may advocate an energy policy including action on climate change, ultimately George Osborne and the Treasury will have the final say on key issues including:

  • negotiations with EDF about the new nuclear reactor at Hinckley and Austrian objections to the EU about state aid which could delay commissioning beyond 2023
  • the need to boost the UK’s nascent carbon-capture storage industry
  • setting carbon emissions targets for 2030 which will have a major influence on energy investment