Energy Bill to provide certainty despite current confusion

Posted on 18 Oct 2012 by Tim Brown

In a speech to business leaders this morning in central London, Secretary of State for the Department of Energy and Climate Change, Ed Davey MP announced that the Government's long anticipated Energy Bill will go before parliament in November.

Hoping for cross-party support for the bill, the minister provided a number of insights into the Government’s soon to be updated energy policy.

One of the key points was that the Government will most probably opt for a single government-owned counterparty for the operation of the Contracts for Difference (CfDs) – the feed-in tariff that will provide increased revenue certainty to low-carbon generators.

In addition the minister promised further clarification of how the strike price will operate and how CfD payments will flow from suppliers to generators when the CfD strike price is higher than the reference price and vice versa.

The minister said that the energy bill would be rolled out in phases and that it would be focused on encouraging investment but said the reforms would also be “good news for consumers, including business consumers”.

Also speaking at the event, Dr Neil Bentley, CBI Deputy Director-General, said that progress on energy policy had been slow and that he had been talking on the matter for about four years and described the speed of progress as “pretty frustrating”.

Highlighting the impending issues over security of supply, Dr Bentley quoted recent figures from Ofgem which predict that energy capacity margins (the difference between amount of energy able to be produced and the amount being used) will fall from 14% in 2012/13 to 4% in 2015/16.

“My core message today is that we need to boost investor confidence urgently…We need an estimated one hundred and ten billion pounds worth of investment in our energy system…That investment has to be seen as a huge investment opportunity.”

The Government hopes that to boost investor confidence with the combination of its upcoming Energy Bill as well as the Growth and Infastructure Bill, which is designed to drastically reduce consultation times for major works projects.

However, despite the Government promising clarity, confusion has continued to mount over the Prime Minister’s announcement earlier this week that that gas and electricity firms will be required in law to give customers the lowest available deals.

Shadow energy secretary Caroline Flint said the Prime Minister’s statement had thrown energy into confusion, adding: “It caused chaos in the energy industry and I have to say it left his own ministers at a loss as to what energy policy actually is.”

In his closing statements at today’s event, Dr Bentley drew attention to the damage caused by such confusion.

“With every new story that adds to the sense of uncertainty, I hear more phone calls from overseas head offices to UK executives asking whether it is worth putting further work into scoping out possible investments in the UK. We are competing on an international stage for investment. We should never forget that.”