The UK government’s Energy Bill is “over-hyped” and has failed to deliver its long-promised investor confidence, according to one of Britain’s biggest consultancies.
Ernst & Young today said the Bill – introduced three months ago with the intention of stimulating billions of pounds of investment in low carbon energy generation – has not managed to meet the finance community’s high expectations.
Ben Warren, Ernst & Young’s environmental finance leader, said the legislation had been undermined by “a series of delays and some very public political squabbling” and had fallen short of delivering its “over-hyped, once-in-a-generation-chance to reform the UK’s energy market”.
He added that “although the Bill is still welcomed, it is now seen as a framework with long term commitments, rather than a transformative piece of legislation”.
Warren said that the main source of disappointment for investors was that a decision to set a decarbonisation target will not be taken until 2016. “This delay cast doubts over the UK’s commitment to cut carbon emissions by 50 per cent by 2027 and left investors with a sense of uncertainty.”
Also under fire from Ernst & Young is the government’s planned tax breaks for shale gas exploration. “While the promise of low cost gas cannot be ignored,” said Warren, “environmental groups and businesses are sceptical that a gas boom similar to the one witnessed in the US can be replicated in the UK.”
Warren said that shale gas should instead “be used as an interim measure to sustain energy supply levels while the cost of renewables continues to fall”.
A key plank of the Energy Bill is the introduction of contracts-for difference, a guaranteed minimum price paid to energy generators for the power they provide. However exact figures for any form of generation have yet to be revealed – the government is currently negotiating with EDF on the strike price for nuclear – and this delays has “continued to frustrate developers and dampen investor enthusiasm”, claimed Warren.