Lack of energy investment predicted to add £120 to our annual household bill

 

This week the UK Energy and Climate Committee have released a report stating that cuts to solar, onshore wind and biomass subsidies mean that green energy projects are being put on hold because investors don’t feel safe to finance future projects. There is concern that more Government policy changes could jeopardise future investments. 

 

The Energy and Climate Committee report

The Energy and Climate Committee is a select committee of the House of Commons who examine spending, admin and policies of the Department of Energy and Climate Change. The chair of the committee, Angus MacNeil MP said this week:
"Billions of pounds of investment is needed in order to replace ageing energy infrastructure, maintain secure energy supplies and meet our legally-binding climate change targets. Since coming to office in May, the Government has made a number of sudden and unexpected changes to policy.  This has spooked investors and left them wondering 'what will be next?'"

 

The emerging gap between energy supply and demand in the UK

The Government's impact assessment of policy changes suggested in December 2015 that the solar subsidy cuts could result in 18700 job losses. Together with job losses in coal power stations and the cancellation of a £1billion Carbon Capture and Storage project, this makes investment into energy in the UK an unattractive option right now. The Government have made a total of 16 energy policy announcements in the last 12 months. With the future direction of the UK’s energy sources being uncertain, investors don’t know where their investments would be secure. 
But with the phasing out of coal fired power plants we need to replace energy to the national grid from other sources, as Britain is facing difficulties meeting the power demands of the national grid at peak times. There are real concerns that the current phasing out of coal-fired stations, together with decreases in support for renewable energy, mean that there will not be enough energy for everyone by 2025.

 

What about nuclear energy?

It is also likely that the development of a new nuclear power station at Hinkley Point – which aims to provide around 7% of the UK’s electricity by 2025 - will be delayed, as the chief financial director of EDF resigned last week. EDF are due to provide two thirds of the financial investment for Hinkley Point, along with a third coming from Chinese investors. It is being reported that the reason for this resignation was because of the risk of the Hinkley Point project to EDF’s finances. A final investment decision from EDF was supposed to be made in January, but it is still on hold. 
The director of the Hinkley Point nuclear power project also resigned last month, highlighting apprehensiveness about the project. If the nuclear power station goes ahead, the government has committed to pay around double to the French and Chinese investors per unit of energy, than the current rate that we pay. This is predicted to cost 30 million UK customers about £4.4 billion, with estimates reaching much larger figures.

 

The cost to UK households

As the source of our energy continues to evolve, it is important to ensure that families and businesses will have a reliable and affordable supply of energy. This means that the government will need a forward thinking approach to find a solution that meets the emissions target set out by the Climate agreement reached in Paris. This will also mean more support for the renewable energy market. Without urgent changes being made, the Energy and Climate Committee report predicted that the overall result of the current energy uncertainty – aside from the nuclear cost - will mean an extra £120 a year added to household bills. 
The report concludes that the Government urgently needs to clarify their low-carbon energy policies, to safeguard future investments into UK energy.