MPs: energy policy shifts have hit investor confidence and will raise consumer costs

The government is taking a short-term approach to energy policy that is damaging investor confidence and will increase the cost to consumers in the long run. And sudden policy changes combined with the lack of a clear vision on energy have unsettled investors and probably caused a ‘hiatus’ in new projects. Those was the conclusion of MPs on the Select Committee on Energy and Climate Change (Eccc) in a report on investor confidence in the sector, which told government that it, and future governments, must learn lessons on making and presenting policy.

Launching the report, Eccc chairman Angus MacNeil MP said, “Nervousness among investors will make it harder and more expensive to build the new energy infrastructure that we need. Any increase in the cost of project capital will ultimately get passed on to consumers through higher energy bills.

…  Decisions made by the government now have long-term impacts so it is important that the government thinks carefully about the consequences for investors before leaping into policy decisions.”

“We are calling for the government to introduce Investment Impact Assessments for new policies to ensure that new policies don’t inadvertently discourage the investment that we desperately need.”

The report called for more transparency in decision-making and more information about the likely impacts.

The Committee also called for immediate action from the government on low-carbon investment:

  • Set out a detailed plan for  the next three rounds of Contracts for Difference (CfD) auctions: timing,  budget and eligible technologies.
  • Publish the assumptions and methodologies that underpin the LCF – MPs pointed out that this information had been awaited for seven months, despite promises to publish it.
  • Set out how much money will be available in the Levy Control Framework beyond 2020.

The committee welcomed plans for the National Audit Office to examine the LCF later this year.

Longer term, the committee wanted the government to set up an institutional framework that would mean the new National Infrastructure Commission as well as existing bodies like the Committee on Climate Change had a consistent and clear ‘road map’ for the industry. It said the process of developing a plan for the Fifth Carbon Budget presented an opportunity to work through such a plan.

See the full report here

Further reading:

Levy Control Framework – a chance for budget discipline or a political fiction?

Investor confidence falls

Subscribers: login to read more on evidence to the committee