Engineering news
The government must set out a credible, long-term vision for the future of the UK’s energy system, according to a report published by the Energy and Climate Change Committee.
The report, entitled ‘Investor confidence in the UK energy sector,’ outlines that investor confidence has been dented by a series of sudden policy changes since the election, which may lead to a hiatus in project developments and threaten the UK’s ability to meet its energy security and climate change objectives.
Angus MacNeil MP, chair of the Energy and Climate Change Committee, said: “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 coming to office in May, the government has made a number of sudden and unexpected changes to policy. This has spooked investors and left them wondering 'what will be next?'"
Britain has a target to cut its carbon dioxide emissions by 2050 to 80% below 1990 levels but also needs to invest around 100 billion pounds to replace its ageing nuclear and coal power plants. However, the Committee said that the contradictory signals coming from government were causing some investors to put projects on hold, until there was more clarity on energy policy. Other factors affecting investor confidence include a lack of transparency in the policy decision-making process and a policy ‘cliff-edge’ in 2020.
MacNeil added: "Two months ago, a historic new global climate agreement was signed in Paris. But when the UK government talks about using more gas while simultaneously cutting funding for carbon capture and storage or the need to control costs while halting onshore wind, which is the cheapest form of low-carbon energy, investors begin question how committed the government really is to tackling climate change.
“The government must set out a credible, long-term vision for the future of the UK’s energy system. The government will this year have to produce a plan setting out how we will keep on track to reduce our carbon emissions in 2030 and beyond. This is an ideal opportunity to rebuild confidence in the direction of travel for the energy sector in the UK.”
The report also argues that the government needs to factor the impacts that its decisions are having on investor confidence more explicitly into the policy making process.
MacNeil concluded, “Nervousness among investors will make it harder and more expensive to build the new energy infrastructure that we need. Any increase in the cost of project capital will ultimately get passed on to consumers through higher energy bills.
"We are concerned that the government is only considering short-term costs to consumers when it makes energy policy decisions. It needs to pay more attention to the impact of its decisions on the energy prices paid by the next generation of bill payers. Cutting support for low-carbon energy today may prove to be a false economy in the long-run.
“We are calling for the government to introduce Investment Impact Assessments for new policies to ensure that new policies don’t inadvertently discourage the investment that we desperately need.”