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Obsolete Before It’s Even Law, The Energy Bill Has Proved A Dismal Failure

Jeremy Warner, The Daily Telegraph

Nowhere is this lack of progress in establishing the building blocks for a more productive and prosperous economy more apparent than in energy policy, which for decades has never been anything other than a hopeless mess but is now in danger of transmogrifying into an unmitigated disaster.

Last week, Ofgem, the energy regulator, upstaged Mr Davey’s own set of announcements on subsidies for renewables by warning in stark terms that lack of progress on energy investment meant a real risk of power cuts from the middle of the decade onwards. National Grid piled on the embarrassment by further raising the prospect of blackouts and short-time factory working.

Anyone would think we’d been put in a time machine and spirited back to the 1970s. The problem was, of course, very different back then – the miners – whereas today it is that of emission targets and failure to adequately plan for the closure of now obsolete plants. Yet the outcome is much the same – the now imminent possibility of power shortages.

Mr Davey’s “plan”, such as it is, seems to involve a combination of subsidising big users to reduce their demand, or alternatively generators to bring mothballed gas plants back into service to deal with spikes in energy consumption. Yes indeed: the Government plans to subsidise generators to bring back the very capacity it is trying to get rid of. The wheels of Whitehall grind exceedingly slow, but even by government standards of indecision, something has plainly gone very wrong with energy policy. Great swathes of coal-fired and nuclear capacity are to be closed over the next five years, yet the margins are too small and the uncertainties too great to persuade the industry to build the necessary replacements. In all, it is reckoned that £110bn of new investment is required.

Why the paralysis? The competing demands of climate change commitments, which preclude all but the most expensive solutions, and the Treasury, which obviously wants to keep the costs as low as possible, are a large part of the explanation. Into this mix, inconveniently, steps the shale gas revolution. Even five years ago, nobody would have predicted the way in which fracking has transformed energy prices. This has left the Coalition’s energy strategy – in essence, just an evolution of what the previous government was planning – looking like a historic relic before it’s even come into force.

Ministers are going to seem pretty silly if we are drowning in cheap energy five years from now having just invested in fleets of expensively priced renewables and new nuclear. The suspicion that there are better alternatives is causing policy to waver. The indecision is not confined to the UK; it is a Europe-wide phenomenon.

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