So here we are coming up to just a year before the election and the coalition is still struggling with how to get us towards the low carbon future without pricing industry out of Britain and without scaring away support from their traditional voters. A lot has happened to change the energy landscape since they took office: much unforeseen such as the Japanese tsunami, the German response to nuclear power and the shale gas revolution in the United States. But the sovereign debt crisis has probably had the greatest impact with grandiose plans for large scale energy investments either abandoned or dangling on the ropes. All a far cry, it seems, from those halcyon days when Britain was to lead as the greenest economy in the world.
That civil servants have laboured long and hard with the painstaking detail of Electricity Market Reform is not in dispute. Nor is the commitment from politicians of all parties to do their bit to combat climate change, steering through the Energy Act with unprecedented support. But just how long and tortuous this journey will be to a cleaner future is only now coming home to consumers. Can competition flourish in such an environment? A fresh look at the way the big energy firms operate has had to be ordered to rebuild trust.
More Delay Can Only Create More Uncertainty
With much speculation over whether Ofgem will survive past the election, it now falls to the newly formed Competition and Markets Authority to find a way forward. In short to ensure suppliers play fair in keeping prices in check whilst at the same time having sufficient incentive to bring forward the much needed investment in new plant and infrastructure. At the moment “a clearing of the air” seems to be the best on offer in terms of the eventual result. But there can be no guarantee that even after 18 or 24 months of deliberation the reference will provide answers to all the questions.
Meanwhile politicians threaten price freezes and break-ups in their search for sound bites and the industry retaliates with warnings of a hiatus in investment. The CMA has to face three unfortunate truths which have recently been picked up in the popular press and which challenge traditional thinking on how to go low carbon.
Firstly funding the high cost of switching generation primarily through increasing customer bills is now seen as politically unsustainable. Following the Miliband call for a price freeze, closer attention is being given to whether some (or all) of this should come from general taxation.
Secondly, the UN is shifting its focus on global warming, developing strategies for surviving its effects rather than carrying on trying unsuccessfully to eliminate it. This is clearly evident in the new report from its Intergovernmental Panel on Climate Change (IPCC). The report concludes that even if world leaders act now to cut emissions their efforts will take decades to bring results whilst emissions will continue to grow. The effects of rising temperatures need to be coped with and developing countries in particular, seen as the hardest hit from global warming, need help now from the extreme events they are already suffering already.
Thirdly when push comes to shove, experience from overseas tells us that the imperative for economic and political wellbeing by governments leaves concern for the planet trailing in a poor third place. In the US for example, the shale gas revolution is bringing heavy industry back home whilst also opening up lucrative prospects for exporting displaced coal. In Germany emissions far from falling are on the rise as additional supplies of high carbon lignite and brown coal are needed to plug the generation gap left by the country’s retreat from nuclear power.
Meanwhile in business the show must go. Energy costs must be kept within budget and interest in energy efficiency programmes kept up there in the boardroom. Company energy plans must be refocused to take account of the changing outlook. But what views do buyers, financial controllers and energy managers need to take now?
These issues will doubtless loom large in the forthcoming series of Business Energy Debates the MEUC is organising around the country: Bolton (Reebok Stadium, May 14th), Birmingham NEC (National Motorcycle Museum, May 15th) and London (Marble Arch Thistle, May 20th). Free to readers of Water Energy and Environment this will be the tenth series we have held of these one-day events. Addressed by energy experts, the debates use electronic voting to gauge customer opinions which are subsequently disseminated to government. They are designed to give you the best informed view of what awaits industrial and commercial energy customers over the year ahead. To find out more click here.
During the day we will be tackling four main areas of interest with debates on each at each venue:
- Government Schemes and Interventions – What Next?
- The Outlook for Gas Supplies and Prices
- Scope for Benefiting from Demand Side Management, and
- Keeping the Lights on and the Prospects for Electricity Charges to Business.
What’s Next from Government?
Topics to be covered will include: the impact on customer bills in the years ahead of the carbon price floor, the cfd’s and feed in tariff pass through charges. The new registration and reporting requirements of the Energy Saving Opportunities Scheme to put alongside the CRC, GHG Emissions, CCAs and EUETS. How are suppliers responding and what impact is the election likely to have on industrial energy policy?
Gas Supplies and Prices
How are we placed for supplies for next winter? What is the likely backwash (if any) from the Ukraine crisis? What impact could US shale have on world (and UK) prices? What are the prospects for rapid development of UK shale and how is the LNG market faring? Ofgem is looking to reintroduce interruptibles. How is this likely to benefit larger gas users able to switch to a standby alternative fuel?
Demand Side Management
Greater interest in DSM benefits everyone and is the logical thing to focus on in the current uncertain situation. First and foremost it helps keep the lights on as new customer initiatives from DECC, NGC and Ofgem recognise. For business customers it offers the prospect of gaining financially from smarter energy planning and management. For suppliers it reduces exposure to unexpectedly high customer consumptions at peak price times. DSM is getting its own debate this year and quite rightly so.
Electricity Availability and Charges
The final debate of the day focuses attention on the likely pattern of power charges for the year ahead in terms of the prospects for wholesale market ,, the new transmission and distribution delivery tariffs and the array of pass through charges and levies. Whilst this winter has seen above average temperatures what are the prospects of the lights going out in 2014 and how spikey could prices go?
One thing for sure is that opinions this spring will be as forthright as ever and we are looking forward to three informative and entertaining days. If you haven’t been before come and join us!