Energy investment central to UK’s plans for growth

The scale of investment needed in energy infrastructure "dwarfs" that needed for the transport, water, and communications sectors, says the Secretary of State for Wales.

Speaking at the Wales in London event this week, Secretary of State for Wales David Jones, said that between now and 2020, 20% of the UK’s energy generation will go offline.

“We need to replace [this 20%] just to stand still. But our energy consumption is also increasing – so standing still is not an option,” he says.

Jones highlighted the challenge of encouraging investment, as finances are constrained and due to lower levels of liquidity since the financial crisis.

Although traditional funders of power generation face strained balance sheets and new challenges to accessing finance, an opportunity is arising, says Jones, for independents, different types of investors and new sources of capital to enter the market.

However, without Government support and clarity, and the right incentives, investment in low carbon will “not come forward at the scale and pace we need”, he added.

Jones said: “UK must compete with international markets for limited resources and capital; we are doing this by providing a long term, transparent and stable regulatory regime, by providing the right conditions for investment”.

This certainty for investors has come in the form of the Government’s new support mechanism, Contracts for Difference (CfDs), part of the Coalition’s Energy Market Reform (EMR).

Published in August, CfDs aim to stabilise the prices received by low carbon generation and “ensure that eligible technology receives a price for its power that supports investment”.

“We need as a government to lead by example and provide the long-term visibility that investors need,” added Jones.

However, the EMR is “probably not going to solve our energy needs” according to professor of energy policy at Oxford University Dieter Helm.

Speaking to edie last month, Helm said the EMR is unlikely to be the energy solution for the next 25 years and is not the answer to achieving a transition to low-carbon. He is also sceptical about the EMR effectiveness of “keeping the lights on or ensuring prices are affordable”.

Helm projects that the Government will do little before the general election “but after the general election we’ll need a full energy review to sort the problems out”.

Leigh Stringer

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