Treasury insists low investor confidence is due to volatile energy prices

Low investor confidence in the UK energy sector is more due to "staggering volatility" of energy prices than Government policy on low-carbon, the Treasury has said.

Investors have called on the Government to help them understand how the Levy Control Framework is calculated to provide more stability and clarity

Investors have called on the Government to help them understand how the Levy Control Framework is calculated to provide more stability and clarity

Speaking at the launch of the National Infrastructure Delivery Plan 2016-2021, commercial secretary to the Treasury, Lord O’Neill of Gatley, said there are “a lot of forces that are making life tricky in the energy business, of which government commitment to various parts of it are one.”

In the summer of 2015, the Department of Energy and Climate Change (DECC) withdrew subsidies for some forms of renewable generation following the revelation it had overspent the £7.6bn budget for the Levy Control Framework (LCF) by £1.5bn. Last month, investors called on the Government to help them understand how the LCF is calculated to provide more stability and clarity.

In response to a question on the Government’s commitment to low-carbon in the context of low investor confidence in the sector, O’Neill highlighted the impact of prices, saying: “Oil prices have actually recovered back to the levels at the start of December while most of the media are still focussed on the supposed collapse.”

The National Infrastructure Delivery Plan lays out all of the Government’s infrastructure priorities over the next five years. The energy sector is projected to spend £117.4bn over the period - the highest of all sectors - including at least £18bn to build Hinkley Point C new nuclear power station.

O’Neill added: “While it seems to be a bit of a sport to knock the Government on marginal shifts in some other things, the main underlying rational in the commitment to nuclear is of course because of the external obligations involving climate change.”

EDF Energy chief executive Vincent de Rivaz has said “categorically” that the Hinkley Point C new nuclear project will go ahead, but has refused to confirm when a final investment decision will be made on the £18bn project.

The Government also announced in the recent Budget a £30m small modular reactor-enabling advanced manufacturing research and development programme to develop nuclear skills capacity.

O’Neill said: “Something I am increasingly intrigued by is the potential role of so-called SMRs. It is something that I think needs to be given a lot more explanation, not least because it could be something we can produce in the UK, in the Northern powerhouse in particular, for the rest of the world.”

Lucinda Dann

This article first appeared on edie's sister title, UtilityWeek


investors | low carbon | nuclear | Infrastructure | green policy


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