Utility Week

Utility Week 7th March

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UtILItY WEEK | 7th - 13th March 2014 | 15 Policy & Regulation rEnEWabLEs French renewable connections fall ahead of new law New wind and solar connec- tions in France fell last year amid fears over changes to subsidies. Wind installations fell 30 per cent to 535MW in 2013 compared with the previ- ous year, while new solar con- nections decreased by 45 per cent to 613MW. French energy minis- ter Philippe Martin has announced a review of renewables subsidies, ahead of a new energy law designed to change the country's energy mix to be less reliant on nuclear generation. rEnEWabLEs Germany urged to abolish act A German panel of experts has urged their government to abolish the country's Renew- able Energy Sources Act, claiming that maintaining growth in the renewable sec- tor has led to price spikes. The commission of experts for research and innovation said the promotion of renew- able energy makes electricity more costly and does not lead to better climate protection. rEnEWabLEs Spain proposes €1.8bn subsidy cut The Spanish government has set out its plans for cuts to subsidies for renewable energy producers that could total €1.8 billion this year. The government is seeking to address a "tariff deficit" – the cost of running the grid compared with the revenue from it – of an estimated €30 billion. It is feared the cuts could cause renewable genera- tors to default on their debts. Euro briefs Market view Uncertain futures Political jousting on energy has a big impact on the sector – uncertainty. And that hurts investment, says Mike Harrison. S ix months ago what might have been seen initially as a political win for Ed Miliband during conference season was actually the firing of the starting pis- tol of intense debate on the energy sector. The fallout could result in its the biggest game changer in the energy sector since privatisation. While the government scrambled to answer the call for a debate on consumer energy bills, the industry has been trying to look into crystal balls to discern what the energy sector will actually look like in the next five to ten years, before it invests in the new infrastructure the UK badly needs. This less predictable future for the energy sector has spooked investors even further at a time when political risk has been more prevalent than for years. For example, offshore wind, the most favoured renewable sector of the current government, has seen significant scaling back of developments recently such as the second phase of the London Array and Dogger Bank off the East Yorkshire coast. In addition, UK investors have run the other way when it comes to developing new nuclear, leaving the Chinese and French gov- ernments to fill the void. The independent sector has been hit hardest so far from the fallout from govern- ment indecision and Opposition rhetoric. We know that a number of independent generation developers and financial institu- tions have been telling the government for 18 months that its thinking on the capacity mechanism isn't "bankable". Independents are seemingly going to lose out and only the big six will be able to participate in the auctions using existing assets, rather than encouraging new, more efficient plant to be built. Only now, when the political debate has shied to breaking up the dominance of the big six, has there been movement by the government. In the energy sector, business, media and politics are never divorced from each other. However, seeking to break up the big six has consequences not just in making room for independent suppliers in the mar- ketplace, but also in increasing the risk of blackouts as old plant comes offline and insufficient new plant is built to replace it. Miliband's price freeze will come just at the time when the UK's energy capacity is at its lowest margin in years – some say in "mar- gin of error" territory, with industry figures warning about blackouts or energy-intensive industries voicing concern about interrupt- ible energy supply. So it's not just the actual energy market that could be affected by energy policy, huge sections of the UK econ- omy could come off much worse. Further market reforms in the early years of the next government could also have an impact on other areas, such as smart meter- ing. This £12 billion programme is set to be front-footed by the big six over five years with consumers picking up the tab thereaer. If the big six are broken up to the extent the rhetoric suggests, will they have the ability and drive to deliver this programme? Smart metering is a force for good and is broadly supported on all sides of the political divide, but failure would mean yet another costly government IT fiasco and the consumer los- ing out on managing their energy in their homes. So with all this political jousting, most recently the intervention by the energy sec- retary trying to direct Ofgem on how it ought to conduct its competition inquiry, there are two big questions that need answering. First, will the UK energy sector have the "energy for it" to meet the challenges ahead, both in delivering physical assets and pure will to deliver? Second, do we have to continue to look into crystal balls to see what the future holds, or shouldn't government and industry come closer together to forge a national plan to meet the challenges of security of energy supply and a low carbon economy? While we wait for the answers it is likely the consumer and taxpayer (more or less the same) will foot the costs, while and the potential for new jobs, skills and growth for the UK economy could be lost. Mike Harrison is head of public affairs, Taylor Keogh Communications, specialising in the energy, clean tech, water, and environment sectors

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