The Energy Act should provide the foundations for a genuinely low carbon economy, it is time to mobilise investment
After more than two years, countless column inches, and a mind-boggling number of man hours, the Energy Bill has been granted Royal Assent. And now the hard work really starts.
For all its imperfections, for all the Ministerial casualties and media controversies, the arrival of the Energy Act on the statute book is a major achievement. It potentially marks a sharp and positive turning point in the UK's meandering journey towards a low carbon and sustainable economy. As Energy and Climate Change Secretary Ed Davey is keen on saying, this legislation will create the first clean energy market anywhere in the world. Regardless of what happens next, it is a historic development.
However, the policy framework delivered through this legislation will not magically deliver the clean, reliable and affordable energy infrastructure the UK urgently needs. Politicians, businesses and investors of all stripes now face the daunting task of making sure that the ambitious vision that underpins the government's electricity market reforms is delivered upon.
For the political class that means tearing down the remaining barriers that could discourage firms from investing in new clean energy infrastructure and correcting the flaws that remain in the legislation.
Most notably, those MPs who understand the importance for the clean technology supply chain of a decarbonisation target for 2030 need to keep pushing for the early adoption of a binding goal, just as those who have been warning about the loophole that will allow coal power plants to continue to pollute long into the 2020s and beyond need to continue to raise the alarm. More specifically, tomorrow will offer more detail on how the early stage contracts for difference (CfDs) will be dished out and how the promised capacity mechanism and development of an demand management market will be managed - investors urgently need to see ambitious plans and clear timelines for their introduction. Similarly, State Aid questions need to be resolved as quickly as possible if the UK's nuclear renaissance is to stand any chance of delivering power by the early 2020s as planned.
Going forward, more needs to be done to help overcome the technical and logistical challenges faced by clean energy developers, and in this regard news today that the Able Marine Energy Park on Humberside has finally been granted approval is hugely welcome. Equally, more needs to be done to ensure smaller independent energy suppliers really can compete on a level playing field with the Big Six.
Meanwhile, the entire green economy will be watching closely to see how the new electricity market reform programme is managed and how inevitable future changes to the regime are handled. There is little doubt some of the support levels delivered through the Energy Bill will be too high and others will be too low - that is simply the nature of technology subsidies. Ministers will need to manage changes in a mature manner if they are to avoid spooking investors, just as they will need to be extremely careful as they transition to a more cost effective mechanism of auctioning contracts.
A significantly more ambitious national energy efficiency programme is also urgently needed to help hold down energy costs and defuse the increasingly toxic accusations that this entire exercise will burden households and businesses with excessive bills.
Most importantly, perhaps, all three of the main parties will have to ensure that the policy foundations established by the Energy Act are built on through consistent and coherent political rhetoric and supporting policies. CfDs and the capacity mechanism might offer competitive returns for investors, but projects will still struggle to move forward if they are hampered by hostile planning policy, weak carbon taxes, and a nagging fear that some members of the government are so unreceptive to the green agenda that they would think nothing of trying to unpick a legislative framework that now unashamedly favours clean energy.
But while the politicians' to do list remains as long as ever, businesses and investors have responsibilities too. It may not be perfect, but the Energy Bill delivers much of what green businesses and NGOs have been calling for - stable and predictable financial returns for clean energy and back-up power capacity, an end to new build coal power plants in the UK, and a mechanism for encouraging energy efficiency and demand management technologies. This is a broadly attractive package of incentives and regulations at a time when the UK urgently needs to deliver new energy capacity - developers, investors, and energy companies need to respond.
We will only know in a few years' time if the Energy Bill has delivered, by which point it will probably be too late to tackle the energy and climate security concerns that sparked the bill in the first place if it hasn't worked. But as the Bill today secures Royal Assent, the opportunity on offer for those businesses willing to embrace it looks to be considerable. It is not perfect, but there are attractive returns on offer for those organisations that can deliver the well managed clean energy projects that the UK desperately needs. Meanwhile, businesses outside the energy sector need to be aware that while the Energy Bill will deliver greater energy security and lower carbon emissions it will also push up the price of energy, making investment in energy efficiency and engagement with the demand management mechanisms enabled by the bill ever more important.
The UK's energy industry is about to undertake one of the biggest transformations since its formation. And as every good entrepreneur knows, where there is change on this scale, there is also huge opportunity. Business leaders from across UK Plc need to now seize that opportunity. We have an Energy Act, now is the time for energy action.
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