Amber to green in energy policy reset?
It was the moment the industry has been waiting for, the Secretary of State’s ‘reset’ speech setting out the government’s energy policy vision. To the disappointment of energy policy geeks like myself, Amber Rudd started by saying “I want energy policy to be boring” but the ensuring speech was anything but.
The headline announcement was the plan to phase out coal-fired generation by 2025, which sounds like an impressive commitment from the UK ahead of the Paris COP talks. However, the small print says this is contingent on new gas-fired generation coming forward to replace it, which will not be as straightforward as reviewing and amending the Capacity Market.
The announcement on plans to hold up to three CfD allocation rounds for offshore wind, starting at the end of next year did come as a surprise. The industry will be held against its promise on achieving cost reductions and it is unclear what the requirement for “intermittent generators to be responsible for the pressures they add to the system” will mean in practice.
Aside from the policy specifics, the speech narrative followed Government’s past and current role in the energy market and how it will evolve. Amber Rudd admitted that government intervention “will always remain so in an industry that delivers such a vital service” but was critical of the fact that “we now have an electricity system where no form of power generation, not even gas-fired power stations, can be built without government intervention”. The Secretary of State set out how the Government would aim to extricate itself from the market by 2025, including phase out of subsidies (presumably only new ones). That’s clearly easier said than done, particularly with an ambitious set of carbon budgets, and the speech indicated more intervention in the short term.
A commitment to “help deliver more this Parliament to restore the ETS to full health” is welcome, although the call to action on transport, heat and waste was an indication that the electricity sector can only do so much in achieving the 2050 target, to which Amber Rudd reaffirmed her commitment.
Overall, some parts of the industry will clearly be pleased by the speech, and others not. We can at least welcome some increased clarity and the Autumn Statement on the 25th November will reveal the resources at DECC’s disposal to put the rest into action. What we do know for sure is that it will give the energy policy geeks out there a fun-filled 2016!