Uncertainty in UK Energy Policy
The London Financial Times today has an article by Andrew Duff, CEO of leading UK gas and electricity provider, RWE npower, criticizing the UK Government’s energy policy, and the uncertainty created by it for energy companies:
“But increasingly the market signals are being obscured by a fog of uncertainty surrounding planned new regulation. This leads in turn to delay in investment and so, although the National Grid’s seven-year forecast of power generation shows plenty of planned new capacity, a closer look reveals very little actually under construction. Ordinarily one would expect any decline in security margins eventually to signal the need for new build, but there are two extra factors creating a logjam.
The first is the European Union’s large combustion plant directive. …
Second is the European emissions trading system in carbon dioxide allowances. This is approaching its second phase in 2008 with no ground rules established for its operation in the UK. Electricity is bought and sold years in advance and, without knowing the availability or cost of carbon dioxide emissions allowances, the market cannot set prices with any confidence.
Further out still, we wonder about the shape and scope of carbon trading beyond 2012 and what, if any, successor to the Kyoto protocol will emerge. These are fundamental gaps in our knowledge at a time when the UK energy industry urgently needs to be considering investment in new power generation. If we cannot evaluate outputs, costs and revenues we cannot make investment judgements.”
For the full article, see:
Andrew Duff: Regulatory uncertainty threatens UK energy. Online edition: 2005-10-16, paper edition: 2005-10-17 (Subscription required)