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Davey and Goliath

In the fight between Osborne and Davey, only one side can win; whatever the result, the ramifications for the future of UK energy will be much more significant than simply bruised egos.

23rd October 2013    |     Peter Rolton: Chairman, Rolton Group

The indecision at the heart of today’s government continues to fuel debate and concern, as one move after another made by the DECC towards a cleaner future for energy is immediately parried by a retaliation from the Treasury, who hope to ensure the UK’s position as a hub for fossil fuels. Take for example Energy Secretary Ed Davey’s claim during a speech for the CBI that he wants to ‘take the politics out of energy,’ happening whilst Osborne plans around him to remove green fuel subsidies and simultaneously provide tax breaks and financial incentives to gas and oil companies.

The division felt at the core of Government is created by Osborne’s insistence that there should be no preferential treatment towards the comparatively embryonic green sector. Whilst he claims to see their potential value, they will only become viable when their cost reaches parity with traditional fuels. Whilst competitive cost is of course the eventual goal of the sector, it is simply unrealistic to behave as though this is possible without consistent and substantial support during this pivotal stage in the industry’s development. By cutting subsidies and piling support on to other, less future-proof technologies, the Treasury is effectively switching off the life support before clean fuels have the infrastructure to survive independently.

With every step forward, it seems the UK energy industry takes several small steps back; each instance of this discourages larger numbers of investors, who edge back from committing to a future here due to the uncertainty of support they will be able to expect in months to come, let alone years. Davey has publicly given his support to a legally binding carbon limit for 2030, but the Treasury has remained unconvinced of the need to push for rapid de-carbonisation during such a fragile economic period, and this has created yet more tension between the two branches of Government. Davey’s advocacy of guaranteed loans for energy companies investing in renewable and clean energy has also been rebutted by Osborne, who has made his commitment to traditional energy very clear.

Rather than waver on the subject of clean energy, Osborne has reinforced his almost derisive attitude towards the green lobby within Government, referring to them as the ‘environmental Taliban.’ Instead of investing in technologies which will substantially reduce consumer cost in the long run, he is now advocating a ‘levy control framework,’ which will place a cap on the total subsidy available to green power sources. This, he argues, is to combat rising energy prices, but by placing yet more obstacles in the way of green energy whilst simultaneously removing them from the fossil fuels in the form of tax breaks and extra incentives, he is making a clear statement of support for the latter, and squandering the UK’s chances of being a leader in the era of clean energy.

Shadow Energy Secretary Caroline Flint captured the thoughts of many when she compared the recent debacle over energy tariffs to something one would expect from the satirical BBC show, ‘The Thick of It’; as soon as David Cameron revealed plans to force energy companies into offering their best deals, said plans unravelled to nothing more than a potentially damaging scheme which will force prices up rather than down. The extremely public in-fighting is doing nothing to quash this ever more pervasive image of reckless and ill-thought legislation.

With the upcoming Energy Bill giving rise to hopes of a long overdue consideration to the future interests of the nation, the industry is waiting to see who will win this round in what is an exhausting and frustrating battle of wills. Unfortunately, many anticipate Osborne’s dreams of a gas hub to manifest, leaving the UK’s power in an extremely vulnerable position.

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