Investors deterred by energy policy uncertainty

By Roger Harrabin
BBC environment analyst

  • Published
Wind turbinesImage source, Science Photo Library

Essential investment in the UK's energy system is still being deterred by policy uncertainty, a survey suggests.

Members of the Energy Institute say investing in nuclear and renewables is risky following unpredicted delays and changes in subsidies.

Their biggest fears are over carbon capture, a technology the PM said was vital, before he withdrew funding.

The government says it will reassure investors with a new plan in the autumn for clean, secure, affordable energy.

The Energy Institute is the industry's professional body. Its survey also indicates an expectation that if the UK were to vote to leave the European Union it would create problems for energy supplies, renewables, climate change and air quality.

It suggests members do not trust the UK or other countries to keep their promises to reduce greenhouse gas emissions to safeguard the climate.

Lack of confidence

The survey was completed by 438 energy professionals, academics and analysts who are members of the Institute.

When asked what were their biggest fears they cited "energy policy continuity" following a year of multiple unheralded changes in support of clean technologies.

The government offered what it called a "reset" of energy policies in November, planning to deliver a new wave of gas power stations, support low-carbon energy and promote a flexible electricity grid - but the announcement was criticised for leaving too much uncertainty for clean technologies.

"Plainly, the government's energy policy 'reset' has yet to reset confidence among professionals working in the energy sector," the Energy Institute said as it released its latest survey on Wednesday.

It says low oil prices are a further factor discouraging investment in energy efficiency and low-carbon technologies, as well as in UK oil and gas supply.

The Institute's members say that, despite the euphoria surrounding the Paris climate change agreement in December, they are sceptical countries will deliver their commitment to hold global temperature increases to well below 2C and to try to limit the temperature increase to 1.5C.

Most members do not expect emissions to be held at the level associated with a temperature rise of 2C. Even fewer believe this is likely than did last year before the Paris deal.

A majority think the UK will slip behind its carbon budgets for the coming years and fall significantly short of its goal of reducing emissions by 80% below 1990 levels by 2050.

Brexit concerns

There is a particularly gloomy outlook on energy efficiency: professionals working in the sector say despite government promises to radically improve efficiency, its policies so far have had no effect.

Prof Jim Skea, president of the Energy Institute, told BBC News: "The single biggest wish for people working in UK energy is stable government policy that helps them decide where to invest profitably.

"Renewable energy and capturing carbon - key to implementing the Paris climate agreement - are seen to have been particularly badly hit by policy changes over the last year."

A government spokesman told BBC News: "We are giving investors the certainty they need to come to the UK with our long-term plan for a secure, affordable and clean energy system fit for the 21st Century.

"We're doing this in a way that will meet our climate change commitments in the most cost-effective way, and have already reduced our emissions by over 30% since 1990."

Prof Skea also explained members' fears over the UK's EU referendum vote: "The overwhelming majority (by 4-1) of energy professionals foresee negative impacts on the UK energy system under Brexit.

"Our members have highlighted energy security, energy innovation and renewable energy development as particular areas of concern."

Those who want to leave the European Union say the UK could reduce energy prices if they were outside the bloc, and that other European countries would still want to sell their electricity to the UK after Brexit.

Follow Roger on Twitter @rharrabin