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Directionless government policy is having a “serious and unprecedented” impact on investment in the UK’s energy sector, market monitoring firm EnAppSys has warned.
The delay to the government’s final decision on Hinkley Point C is just the latest example of such policy uncertainty.
“Right now the greatest issue in the market is managing the levels of uncertainty on-going within the power system,” said EnAppSys director Phil Hewitt. “Whether nuclear should or shouldn’t be part of the fuel mix; the back and forth over whether projects will or won’t get agreements; is affecting the wider industry.”
The firm also highlighted cuts to renewable subsidies earlier this year; the cancellation of the carbon capture and storage commercialisation competition in November; and potential changes to ‘embedded benefits’ experienced by small-scale distribution connected generators as examples of policy in flux.
Hewitt added: “The challenge for market participants and investors at the moment is that what is given out with one hand seems to be taken away with the other, with no clear idea of where the next cut or subsidy is likely to fall. Right now the industry is not able to point out the long-term technology that will win, instead it can only chase the next wave being created by government policy.
“The government needs to decide whether it wants the market to decide or pick winners itself and then not change its mind. The current situation, compounded by Brexit, is that the only certainty is uncertainty and in that case there is a distinct possibility that capital will look elsewhere than the UK electricity market.”
EnAppSys said Hinkley is likely to proceed despite “no long-term framework for nuclear and no clear fuel mix or structural expectations for our power system”. Nevertheless, uncertainty over policy could mean it is the last nuclear plant to be built in the country, Hewitt said.
The UK’s wider infrastructure ambitions could be put at risk by any further delay to the government’s decision on Hinkley, Nuclear Industry Association chief executive Tom Greatrex warned last week.
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