Industry fears negative price cap fallout

Survey reveals concern over price regulation impacts and Brexit

Two thirds of the energy sector’s professionals believe that a cap on electricity and gas bills will have a negative impact on private investment, a survey by the Energy Institute has shown.

A further 20 per cent of respondents to the annual barometer said that it would have a “very negative” impact. Only eight per cent said it would boost private investment.

Following last week’s Queen’s Speech, government asked the regulator Ofgem to consult on how best to push ahead with its manifesto commitment to control “abusive” energy billing via a “safeguard tariff”.

Just over half (56 per cent) of respondents to EI’s survey said they anticipate negative impacts on decarbonisation efforts as a result of a price cap and 51 per cent said it will reduce the number of competitors in the energy supply market.

Likewise, over half (53 per cent) opposed price regulation in any guise, but 30 per cent said some sort of price cap may be necessary.

The institute’s members also gave a thumbs-down to the government’s plans to withdraw the UK from Euratom’s nuclear co-operation arrangements.

A majority, (54 per cent) said that withdrawal from Euratom would have a negative impact on the delivery of new nuclear projects, like Hinkley C.

Just over a half (51 per cent) said that pulling out of Euratom would have a negative impact on both the availability of labour and the UK supply chain’s access to non-UK nuclear expertise.

More broadly on Brexit, the survey showed that 60 per cent of respondents anticipate a fall in the availability of skilled workers if freedom of movement of labour is curtailed with 70 per cent saying that the government must remedy the shortfall by boosting apprenticeship and training measures.

In terms of UK domestic energy policy, more than half of EI members think it has had no effect or a negative effect over the twelve months. The only exception is vis-à-vis nuclear, reflecting the government’s decision to grant the go ahead for Hinkley C

On the basis of current policies, energy professionals remain sceptical that the UK will meet its legally binding emissions reduction targets.  Nearly eight out of ten respondents believe the UK will fall short of meeting the fifth carbon budget, which requires emissions to be 57 per cent lower than 1990 levels by 2030.

Commenting on the survey’s findings, EI president Professor Jim Sked said: “The Barometer also reflects the need for ministers to bring forward a credible clean growth plan to demonstrate how they intend to course-correct the UK’s emission reduction efforts. On the basis of current policies, the fifth carbon budget is seen by energy professionals as elusive.”

Just over two thirds (64 per cent) of those surveyed identified energy efficiency as a priority to meeting the economic advantages of the shift to low carbon.

Energy efficiency was also identified as posing the lowest investment risk out of a range of low carbon measures and technologies.

Commenting on the energy efficiency aspects of the survey, EI vice president and former National Grid chief executive Steve Holliday said: “Energy professionals’ advice could not be stronger on putting energy efficiency at the heart of the Government’s strategy. The benefits of energy efficiency stack up for emission reduction, energy security, industrial growth and affordability.”