Coalition's honeymoon ends as energy industry fears power vacuum

The honeymoon is well and truly over.

You would have thought that having got the centre-right government it not so secretly longed for, the CBI would give the coalition a bit more time to get its house in order. But barely 100 days after it took office, the business group launched its first concerted attack on the government, warning that up to £150bn of essential low-carbon investment is being jeopardised as a result of the confusion surrounding the UK's energy policy.

The fact the CBI targeted energy policy and the Department of Energy and Climate Change (DECC) for its first concerted moan about the new government will come as no surprise to observers who have been warning for several months that the coalition has failed to get a handle on an issue that climate change and the impending energy gap should make a top priority.

The CBI's short but effective eight-page report, No Time to Lose – Deciding Britain's Energy Future, summarises the problem effectively. On too many fronts, businesses and investors are awaiting clarification on critical policy issues, and have no idea when that clarification will come and what form it will take.

Take the coalition's much-trumpeted plans for energy market reform and a floor price on carbon to drive investment in nuclear, clean coal and renewable technologies. As the CBI notes, "consultation on both issues is due in the autumn although clarity over the final policy and its enactment remain a considerable way off, which in turn is delaying urgently needed investment". Or look at the renewable energy industry, which is continuing to grow at a fair rate of knots, despite uncertainty over renewable energy targets, the future of the current subsidy regime and the plans for renewable heat incentives. "Taken together this represents considerable uncertainty for both suppliers and users in a policy area already seen by some businesses as lacking credibility," concludes the CBI. Translation: "For God's sake, tell us what is happening".

So what is happening?

Well, energy industry insiders are increasingly dismissive of the government's protestations that these things take time and it is moving as fast as it can to deliver coherent energy policy.

They have some sympathy when the new energy and climate change secretary Chris Huhne argues – as he did today in a rather ill-tempered letter to the Guardian criticising (but not really denying) reports the government will not introduce its proposed emissions performance standard for coal-fired power plants in the autumn – that he inherited a dog's dinner from the previous Labour government. But at the same time the industry knows that while Labour ignored energy issues for far too long, DECC had begun to make progress over the past two years under Ed Miliband. They also know a lot of the initiatives the coalition has claimed for its own, such as the Renewable Heat Incentive, the Green Home Loan scheme and the proposed Emissions Performance Standard, were already in the pipeline at the time of the election.

Industry insiders are also happy to give the coalition the benefit of the doubt when it says it wants to be the "greenest government ever". Many of the policy proposals that make up the coalition agreement are sensible and command broad support – the problem is they are taking far too long to take shape.

Unfortunately, figures in the low-carbon economy are beginning to conclude that the reason for the energy policy delays is down to the simple fact that those parts of Whitehall that really matter, Number 10 and the Treasury, aren't that interested.

It is informative that Number 10 reportedly no longer has a point person for energy and environmental policy, while sources also suggest that the appointment of a Lib Dem at the helm of DECC means the department has been locked out of the Downing Street loop.

As one energy industry insider with close links to Whitehall observes, "all the intellectual spare capacity in the government is focused on the deficit and the budget cuts, and there is very little capacity left to look at other political priorities". With the leadership fixated on the deficit, the rest of Whitehall is left to indulge in its favourite pastime of engaging in departmental turf wars – a scenario that represents particularly bad news for a department such as DECC, which is small, relatively new and requires co-operation from virtually every other department.

The net result is the current energy policy stasis – a situation that is unlikely to be resolved until at least the autumn spending review is completed and probably not until next year. The CBI and the wider energy industry are unlikely to get the policy clarification they want within six months and the fears that many large-scale low-carbon projects will be delayed as a result look increasingly valid.

The only hope is that the coalition's leadership accepts the honeymoon is over, pulls its head out of the deficit sand and realises that the secret to a successful government, and marriage, is the ability to address more than one problem at a time.