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The government risks a ‘slow sapping of confidence’ in its plans to bring forward low carbon investment following its decision to delay the Contracts for Difference (CfD) auction, a former senior civil servant has warned.
In an exclusive column for Utility Week the architect of the government’s electricity market reform, Jonathan Brearley, has warned the new Conservative majority government that delaying the next round of auctions for the CfD regime means “the worst of all worlds” for investors.
The new government is faced with a worrying overspend of its CfD funding pot, known as the Levy Control Framework (LCF), which pays out support to low carbon developers through regular auctions.
As a result the government has delayed its CfD auction planned for this autumn. But by failing to give any indication of when it will take place the government may be setting itself up for persistent erosion of investor confidence.
Brearley acknowledges that the government does have a problem to solve over the LCF, however he adds that leaving the situation open ended means investors will have little choice, but to sit on their hands until things are clearer.
“The result will be a slow sapping of confidence as their wait continues,” he writes.
Brearley left the Department of Energy and Climate Change in April 2013 to take up consulting work with potential investors in the UK energy market, and now says the latest blow to investor confidence has already begun to impact key, influential stakeholders.
“The noise and tenor of concerns has been growing, and those who worry are getting more senior and more influential in the wider global infrastructure market,” Brearley writes.
“There are now mutterings that government should be held to account for chipping away at confidence and musings on how this should be done,” he adds.
In addition to the delay to the CfD auction the government has also u-turned on the coalition government’s support of onshore wind, the climate change levy exemption and is also putting in place cuts to both solar and biomass developers which “adds to investors worry lists”, Brearley says.
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