‘Continuity in energy policy’ is the top concern of UK energy professionals, surveyed in the EI’s Energy Barometer 2016, with a ‘lack of investment’ a close second. An overwhelming majority of respondents foresee negative effects on the UK energy system – notably on supply security, renewable deployment and energy efficiency - should Britain leave the EU.
“Reducing the peak load on the electricity and gas grid,” is one of the biggest challenges for stability of the UK’s energy system, with surveyed professional calling for improved measures to foster demand reduction and energy management. Importing electricity from the EU through interconnectors is now part of the capacity mechanisms, introduced by the UK Electricity Market Reform (EMR).
Yet, Whitehall’s future energy policies are all but certain – timing and intensity of the coal exit, concessions for carbon capture and storage (CCS) retrofits and fine-tuning of capacity auctions – are just a few concerns that make British energy professionals feel apprehensive and shy away from investing in large-scale power plant projects.
Investment risks are perceived to be greatest for fossil power plants using CCS as well as onshore wind. Unsurprisingly, most respondents think the UK will “fall significantly short” of its goal of reducing emissions by 80% below 1990 levels by 2050. Policy support for new nuclear power stations is believed to have had a net positive effect, along with energy efficiency improvements and Feed-in-Tariffs, though some are rather costly.
“EMR has led to a reduction in strategic thinking”
Scrutinising the components Electricity Market Reform, the survey shows that Feed-in-Tariffs (FiTs) with Contract for Difference (CfD) are predominantly seen as effective – while capacity mechanism and the carbon floor prices viewed as having a “broadly neutral overall impact.”
“FiT has worked well both in the UK and elsewhere. This is a simple intervention that reduces the risks for the investors and delivers the capacity,” one survey respondent said. However, for those EI members that prioritise affordability, most of the above policies are perceived as being “more ineffective than effective.”
One member of the Energy Institute dismissed the constant tweaks of the EMR which made it inflate into an “enormously complex set of rules.” In his view, the risks on developers in getting a project through to consent without knowledge of whether they can get a CfD contract or at what price will outweigh any theoretical advantages.
More simply put, some critics say, the “EMR has led to a reduction in strategic thinking for the UK and delays in investment.” Lack of policy continuity not only hampers innovative technologies but also undermines the delivery of a low carbon energy system that can meet future demand and emissions targets, securely and affordably.