Process groups fear energy price freeze

Labour leader Ed Miliband last week pledged that if his party won the UK general election in 2015 he would freeze gas and electricity prices for 20 months.

The policy was yesterday derided by chancellor George Osborne, who accused Miliband of drawing it up “on the back of a fag packet”.

“Companies would just jack up their prices before the freeze so in the short term, prices go up,” said Osborne at the Conservative Party conference in Manchester yesterday.

“And companies would not invest in this country and build the power stations we need – so in the long term, prices go up.”

Osborne’s claim that energy infrastructure investment could dry up during a price freeze was chief among the concerns raised by process industry trade bodies contacted by Process Engineering.

On the face of it any price freeze would be welcome

CPI director general David Workman

The process sectors are energy-intensive, accounting for 73% of the UK’s industrial energy consumption, and process plant owners could potentially stand to make huge savings on their energy bills under Miliband’s price freeze.

However, with major coal-fired plants shutting down under EU emissions legislation (including npower’s Tilbury plant, above, despite its conversion to biomass) and several nuclear power plants coming to the end of their operational lives, many process professionals fear the potential for enforced factory shutdowns if a price freeze stalls investment in new energy infrastructure.

“The Paper Industry needs secure, uninterrupted sources of energy at internationally competitive prices,” said Confederation of Paper Industries (CPI) director general David Workman.

“Our immediate concern is that the UK is about to enter a phase of energy shortages which will threaten security of supply and push up costs, so on the face of it any price freeze would be welcome. However, the UK energy market needs a huge amount of investment if ageing power plants are to be replaced on time and if they are to meet exacting climate change goals. The fear is that by forcing energy producers to freeze prices it will result in a lack of confidence in the sector, which in turn will lead to a freeze on investment, which in the long run would lead to power outages and even higher prices.”

Ed Miliband’s comments appeared as opportunistic and crowd-pleasing

BPF spokesman

British Plastics Federation (BPF) director General Peter Davis dismissed Miliband’s price freeze as part of a “silly season” at the political party conferences, with a BPF spokesman adding: “We are looking for well thought out, long term strategies that are implemented. Ed Miliband’s comments appeared as opportunistic and crowd-pleasing when we think he should have focussed on solutions to the basic, underlying problem [of energy supply].”

Likewise the Chemical Industries Association (CIA) stressed the need to address energy security, albeit alongside a cautious welcome for any potential halting to energy price rises.

“This is an interesting move and the potential effects need to be carefully analysed,” said a CIA spokesman.

“We are still paying for wrong decisions by Governments over the past decade so it’s important that energy security does not suffer.”