How Brexit, May’s exit and energy policy could affect utilities

The turmoil in Westminster will be a key talking point at the 2019 Utility Week Energy Summit, including how future policy is likely to affect investment in utilities. Nigel Hawkins reports

UK politics is currently in complete disarray. The combination of the highly polarised European election results, Theresa May’s forced exit due to a shambolic Brexit policy and the ballot for a Conservative party leader – and therefore prime minster – is causing profound uncertainty on many fronts.

In the latter case, many hats have already been thrown into the ring, but Boris Johnson is thought to be the favourite of party members – assuming his name makes it on to the final two candidate list.

Brexit has consumed the government, and energy policy is waiting for key decisions from the new prime minister.

Five particular issues are to the fore: renationalisation, price controls, baseload generation, nuclear power and renewables.

Under Theresa May’s premiership, energy price controls have been controversially introduced, despite strong opposition from many Conservative MPs. Indeed, since they were implemented in January 2019, the cap has already been raised by nearly 10 per cent – hardly an unequivocal demonstration of the ability of price caps to keep down prices.

A Tory government headed by a right-wing candidate might well abolish the price cap and let the market be the ultimate judge.

On the baseload generation front, much needs to be done.

Currently, the UK expects to phase out its coal-fired plants by 2025. This policy will probably survive, especially because the UK no longer produces deep-mined coal.

The gas-fired generation sector, whose CCGT plants were once hailed as the saviour of the UK power industry, has struggled financially. The sector has to operate baseload to justify its heavy plant investment and its gas input costs. With a new prime minster in harness, it is likely that renewed attention will focus on the UK’s baseload capacity, despite rising investment in interconnectors.

Fracking, too, has big potential, little of which has so far been realised. Kick-starting it, though, will be controversial.

Allied to this issue is the question of nuclear power. As prime minster, Theresa May eventually gave the go-ahead for Hinkley Point C. However, it does look as if aspirations to build other new nuclear plants have taken a real pasting in recent months.

Two key nuclear projects seem to have hit the buffers – with both Moorside in Cumbria and Wylfa in Anglesey now seemingly consigned to oblivion.

Lastly, the arrival of a new prime minister may well affect the
future of the renewables sector. It seems unlikely that major onshore wind projects in England will be given the go-ahead. But offshore the prospects are very different. Whoever leads the next government is likely to preside over a sharp increase in offshore wind investment.

And the solar sector is also now delivering in the southern part of England, albeit from a low base.

Any new UK prime minister will not be short of issues in his/her in-tray, with Brexit currently being paramount.

But some issues, including energy policy, also need major political input.

Now established as the leading energy event for UK policymakers and industry leaders, the 2019 Utility Week Energy Summit will bring together 150+ key stakeholders to debate these key issues and more. The event will take place in London on 13 June. To find out more read our preview piece here. To book, visit our event website.