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UK’s Energy Policy Struggles To Convince Even Itself

Ben Winkley, The Wall Street Journal

Nobody seems to believe that Britain’s energy policy will come cheap

The British government is trying so hard on energy. Thursday’s announcement of “the world’s most generous tax incentives” for shale-gas production was just the latest in a raft of policy announcements designed to keep the home fires burning.

New nuclear plants will be built. Offshore wind farms will succeed.  The electricity market will be reformed. And all of this at no extra cost to the consumer, it says.

George Osborne the U.K. Treasury chief, announcing the fracking tax breaks this week, explicitly said U.K. shale will keep energy bills low (suggesting, somewhat against the weight of evidence, that they are low to being with).

Not everyone is convinced by the government’s bold claim that household energy bills will fall by 11% as a result of its policies. Analysis from Liberum Capital and RWE npower, an electricity and gas company, suggest the Great British consumer will need to find 19% more in order to fund the £150 billion ($228.3 billion) of investment needed by 2020.

Liberum decided to put that to the test. In a confessed non-scientific poll of 55 industry watchers and money managers, none agreed with the government.

Liberum says that although this doesn’t mean its financial modelling is better than that of the government, it does show that neither the equity market nor utilities are being won over by a key economic policy.

What is most worrying, however, is that five of the respondents are government employees.

The Wall Street Journal, 20 July 2013