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What the General Election Means for UK Energy Policy
by ADE Director, Dr Tim Rotheray
As we near the general election, the Association for Decentralised Energy reviewed the parties’ manifestos to better understand what they will mean for the decentralised energy sector and energy users.
The first thing the jumps out is the continuing focus on the supply side rather than appropriately balancing demand and supply.
The Conservative Party’s manifesto has very little on demand, and includes a lower ambition on household energy efficiency than in the last parliament. Likewise Labour's focus on efficiency while more ambitious and developed than the Conservatives, stops at homes. Both Labour and the Liberal Democrat manifestos commit to energy efficiency as an infrastructure priority, which is a welcome proposal for the sector, but given that the evidence points to cutting waste as key way to ensure least cost emission reductions, there remains limited detail. Unfortunately, energy waste reduction remains an afterthought in energy policy.
Despite loud concerns over the past two years from businesses on their growing energy costs, there is nothing from any of the parties manifestos which shows the importance of improving industrial and business energy productivity or managing their costs is on their radar. It appears to be a real missed opportunity for all the major parties.
Energy costs and the energy market
The Conservative's focus on the cost of energy will be welcomed by users, but the promise to remove relatively low-cost onshore wind subsidies risks undermining this claim.
In addition to a 20-month price freeze, Labour's commitment to resetting the market raises the spectre of yet more regulatory uncertainty, although the proposals will be well received by some in the local energy sector who find the current electricity market inaccessible. It does not seem clear if Labour is aware of the weariness of change that exists in the sector or in the amount of effort and time which such changes require. I remember former energy minister Charles Hendry promising that establishing certainty required a short period of uncertainty, suggesting a period of six months. That was the start of EMR. The EMR process is now almost finalised, five years since it started, and it has not actually reformed the mechanics of the market at all. Labour commits to doing this in 20 months -- I remain sceptical that 20 months will be long enough to effect the change they are calling for.
The Liberal Democrat manifesto reflects their experience gained in government and their aim to own the green energy file in comparison to the other main parties, and it shows. They have the most well thought through positions. The legacy of being in government is clear, however, as commitments to new nuclear (without ‘subsidy’) and a celebration of EMRs successes may ring a little hollow to industry insiders. That said, the focus on efficiency and as the only manifesto to properly consider heat is encouraging to see.
It will be interesting to see how these well-thought through proposals could be implemented if they are able to gain a place in a new administration.
The other parties
Of the other parties, the one most worth a focus is that of the Scottish Nationalists, due to their likely influence in a new Labour government. Their manifesto has an understandable focus on Scotland, but their concerns on Scottish transmission charging costs will face significant challenges considering the industry just reviewed this issue in 2014. A new northern generator transmission discount could be envisaged but that would hugely impact on Ofgem's requirement to for network costs to be ‘cost reflective’ and could result in competition concerns from generators in England and Wales.
Interestingly, as heat and efficiency are entirely or significantly devolved, these areas of policy remain untouched as areas that are already addressed by the Scottish Government. The SNP has a very strong focus on encouraging renewable electricity investment, due to the Scottish wind and tidal resource. This focus almost inevitably sets up areas of tension on the cost of energy policy for the major parties, between the other parties’ interest in driving down decarbonisation costs and the SNP’s desire to support the Scottish renewables industry.
What will we get?
All in all, there is high level agreement on meeting our decarbonisation targets and on further investments in household efficiency, although in both cases the scale vary quite greatly. With so little detail from the Conservatives there appears the most potential agreement will come from the Lib-Lab-SNP pledges, although the devil is in the detail.
Given the current polls showing a minority parliament, it looks like a clear direction on energy policy could be very challenging after May.