The General Election result may not provide long-term certainty for energy. But it does provide continuity

 

Under a Conservative minority government it could be argued that it is ‘business as usual’ for energy policy. Although the General Election result may not provide the long term certainty that many had hope for, it does at least provide some continuity. The issue for the energy industry now is that every single bit of policy or legislation that was previously facing an uphill battle, now has got to cross the Himalayas. Everything is fair game in terms of politicking and from any direction, including Remainers, Brexiteers, Labour, anti-renewable MPs, pro-oil and gas MPs and environmental MPs etc. Nonetheless, key decisions on how we meet climate change targets, Industrial Strategy and the impact of Brexit on energy must all be overcome in the coming months.

Theresa May’s headline energy manifesto pledge was a price cap. This could now present a real headache.  Despite being a populist policy, it is interventionist and could therefore prove unpopular with free-market Conservatives. Trying to push through this policy presents a perfect opportunity for disgruntled backbenchers to flex their political muscles. Equally, it is a headline pledge, generally popular with the electorate, and if May fails to deliver next winter Labour could use it as point of attack. The manifesto stated that the energy price cap would be subject to a “review”. Don’t be surprised if this review becomes the perfect opportunity to kick it into the long grass.

Another area that seems a little less certain is the Government’s commitment to shale gas. There is no obvious reason why May would renege on her manifesto promise to give communities where drilling takes place a bigger slice of the proposed Shale Wealth Fund and to also set up the Shale Environmental Regulator. However, the political and environmental sensitivities that surround this issue and industry’s inability to get commercial operations functioning, mean this too may quietly drop down the pecking order.

The energy industry is crying out for the Low Carbon Growth Plan (formerly known as the Emissions Reduction Plan) to be published. This plan will set out the policies in energy, transport and heating that will ensure we meet our Fifth Carbon Budget. It was due the end of 2016 but was promised after the General Election. The good news is it will see the light of day because it is a legal requirement under the Climate Change Act. Several sectors are looking to the Low Carbon Growth Plan to give them the confidence to invest.

The fear may be that the caucus of Conservatives who oppose climate change or renewables use its publication to reignite arguments about cost to the consumer or undermine the decarbonisation agenda. But it is important to remember that there are green Tories and they will be supported by Labour. A potential consequence of the General Election result is that there has not been a large influx of potentially hard-Brexit, anti-renewable MPs. Nonetheless, it will be important that both business and MPs are vocal in support for the Low Carbon Growth Plan and its importance to the UK’s future.

Similarly, the Industrial Strategy (whatever the future of its main architect Nick Timothy) does receive cross-party support. It will continue to be developed during May’s premiership and possibly beyond. There are good policies in there that are essential for the UK’s future and it is unlikely to be totally deconstructed. Especially if BEIS Secretary Greg Clark stays in place.

And then we come to Brexit. There is a school of thought that with May’s leadership on a knife edge she will be at the command of ultra-hard Brexiteers, effectively ending all hope of a Customs Union agreement for energy trading or EU energy workers. But this argument cuts both ways. If a cohesive cross-party body coalesces in the House of Commons, advocating softer Brexit or a remain poistion, then the ultra-hard Brexiteers will not have free reign. Especially because that mass influx of new Brexit MPs did not materialise.

So now that the Election hiatus is over, the energy industry will be hoping that, despite the challenges, continuity will help get things going again.

By Douglas Mcilroy

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