The Energy Bill is coming

The Queen has confirmed electricity market reforms will move forward this year, now businesses and ministers need to make sure they work

09 May 2012, 13:47

So the rumour mill was wrong. The Energy Bill and its promised electricity market reforms made it into the Queen's Speech, and right near the top, alongside the commitment to introduce a Green Investment Bank, to boot.

Those sources who suggested to the BBC that the bill was likely to be delayed to make way for Lords Reform look to have been mischief-making and the biggest shake-up of the UK's energy market for over two decades should now be completed within the next 12 months.

The Queen's one line promising that her government will "propose reform of the electricity market to deliver secure, clean, and affordable electricity, and ensure prices are fair" represents a major victory for the green wing of the coalition, a huge boost to the burgeoning low carbon economy, and the long-awaited answer to the UK's looming energy crisis. Make no mistake, this is a hugely significant piece of legislation.

All of which begs the questions, why were so many people willing to believe it might be delayed?

The answer lies in the way the government has, for political reasons, chosen to underplay one of the most ambitious pieces of legislation in its agenda.

If you look at the criticism aimed at the Queen's Speech it breaks down into three areas. Firstly, it does not contain enough measures to stimulate growth; secondly, it spends too much time on peripheral issues, such as Lords reform; and thirdly it is too conservative (with a small c), lacking the kind of bold reforming measures the coalition claims to be in favour of.

And yet in electricity market reform the government has an answer to all these criticisms. This is a package of proposals designed to drive up to £200bn of investment and create thousands of new jobs. Its central goals are to keep the lights on while tackling climate change and keeping energy bills low, so it is anything but peripheral to people's long and short term concerns. And thirdly it is a genuinely bold and reforming package of proposals, one that if the coalition wanted to play party politics it could point out Labour never got round to in 13 years in office.

The only conceivable reason why this bill was not central to all the pre-speech briefing and post-speech spinning is that Cameron and Clegg have decided it is too complicated to gain much traction with the public, as well as being too controversial with the small bunch of Tory backbenchers opposed to any measures designed to deliver clean and secure energy supplies.

However, this debate cannot be ducked for much longer.

The bill needs to be finalised and timetabled with DECC pushing hard for the it to emerge in the autumn. The devil will inevitably be in the detail and as such the next few months will be characterised by an almighty row between those green businesses and NGOs who fear the reforms are not tilted far enough in favour of low carbon energy and will instead drive a new "dash for gas", and those (often climate sceptic) think tanks and MPs opposed to any green subsidy mechanisms, which they fear will drive up energy bills. Throw the pro- and anti-nuclear camps into the mix and it is going to be a bruising few months.

These tensions even managed to become apparent in the Queen's 21 words on the energy market, the commitment to "secure, clean" electricity offering succour to home grown renewables, while the promise of "affordable" and "fair" prices gave a nod to those groups concerned green energy means more expensive energy.

But at some point very soon Cameron is going to have to get off the fence and face down those critics who want to see these reforms ditched. And if he is to do this successfully he is going to need the business community to give him the political cover he requires. Those businesses that support these reforms (ie any business that wants to see the continued expansion of the low carbon economy) need to make it plain that, while they may not agree with every aspect of the reforms, the general thrust of the legislation will lead to lower energy bills in the long term, while also bolstering UK competitiveness in emerging clean industries, creating jobs and growth, and helping to boost energy security.

They also need to start planning for the passage of the bill right now. The bill was in the Queen's Speech and barring a coalition-rupturing catastrophe it will pass. Business leaders from all sectors need to be aware of the bold reforms that are coming and prepare accordingly, either by positioning their company to take advantage of the shake-up and the resulting surge in investment for low carbon technologies that will result. Or, at the very least, preparing themselves for the hikes in energy prices that will inevitably occur over the next 10 years, regardless of whether or not the bill passes, by increasing their focus on energy efficiency.

There is a lot resting on getting this right, and businesses would be negligent not to pay close attention to the passage of the bill. Get it right and the UK can cement its place as one of the leading clean tech economies, slash its carbon emissions and improve its air quality, deliver green jobs and growth, and, perhaps most importantly, get off the oil hook and replace rising and volatile fossil fuel prices with a stable and predictable energy market. In the shorter term, get it right and a host of renewable energy companies and nuclear developers will reward the government with a flurry of job creation announcements as they approve ambitious plans for new infrastructure.

Moreover, once electricity market reform is finalised the government will have laid the foundations for a low carbon economy and can turn its attention to all the challenges and opportunities that were noticeably absent from the Queen's Speech, such as the need to address climate change and biodiversity risks, the need to tackle our appalling levels of energy efficiency and looming water crisis, and the need to restore confidence in microgeneration, low carbon transport, carbon capture and storage, and countless other innovative clean technologies.

Pass the energy bill and make meaningful progress on these other issues, and suddenly that "greenest government ever" boast may not look quite so hollow.

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Previously known as the BusinessGreen Blog, James' Blog features musings, observations and occasional rants from BusinessGreen editor James Murray

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