Energy policy: Reality check needed (Comment)

Volker Beckers CEO of RWE npower has voiced his concerns about the current direction of UK energy policy”

The way we have come to think about energy has almost become divorced from reality. We are all aware of the challenges
that the sector is facing today, where we have a fundamental conflict around new investment and new technologies.

Set against the cost of such change, we need to tackle climate change and other social problems and the way we use energy, while all the while energy becomes more and more the fundamental lifeblood of modern 21st Century society and economy.

Policy makers have been trying for many years to prepare a course for Britain that fulfils its social and environmental agenda at a price that is acceptable for all, while ensuring that energy is always there when we need it.

However, we are now on our 10th energy minister in just seven years. That tells you everything you need to know about how difficult it is to square that circle, and actually even more about how [difficult] it is to make progress with such intractable problems.

I feel that we have been poring over every inch of the energy sector’s performance for so long now that we have lost sight of the fundamentals: energy is expensive, complicated, and we should not be surprised that policy is difficult to make work or that bills are larger than we would like.

Issues such as carbon emissions, security of supply and the economy are not onlyfundamental to our well being, they are also interactive: you cannot change one without taking into consideration how that change will affect the other levers at the same time.

This makes any change in energy policy somewhat like open heart surgery, expect that there is no life support system as a backup. The surgery has to work and the patient has to be kept functioning and alive at all times.

So when industry leaders say there are 10-20 issues we are trying to fix as part of the EMR [Electricity Market Reform], then you get some sense of the numbers of measures we are addressing.

Another issue is that political time frames have elections every three to five years, with time for different political moods impacting on the appetite for change and long-term investment.

I am not sure that the recent change in [energy minister] will do much to increase confidence among investors but I am a hopeless optimist and believe we will get the stability we need eventually.

What concerns me is that if the Energy Bill does not drive enough people to change how they use energy then we could find ourselves as an energy industry in a vicious circle of spiralling costs.

Without sensible [controls] on the cost of energy policy, such as for renewables, UK customers will have no protection from these spiralling costs.

I am also still concerned that we are pulling too many policy levers at once. I do not see a cohesive and joined up, planned approach from the government or the regulator at the moment.

I fear that many of these measures do not represent necessarily the best value for consumers or indeed investors in Britain.

We have been talking about this for too many years but now it’s ‘high noon’ and we have to move on.

The energy sector has for many years been fundamentally very stable. But what we are facing now is something that is very game changing.

(Article based on speech given by Volker Beckers at the opening of this year’s Energy Event at the NEC, Birmingham.)