The government has faced a barrage of criticism of late for its repeated heel-dragging over the fate of a prospective third runway at Heathrow and now it’s facing similar criticisms over its energy policy.
An open letter from business lobby group the CBI to the government said, ‘UK industrial firms already pay higher electricity costs than EU competitors and spare capacity on our grid is getting squeezed as we phase out older power stations’. The UK could, it argues, soon be dealing with a supply crunch due to a shortage of investment and uncertainty around the future subsidies available for low carbon power.
There’s certainly no mincing of words in the letter, co-signed by 18 executives from some of the UK’s biggest industrial firms including Tata Steel, BOC, GE and Ineos. It calls for ‘clear leadership and stable policy from government’, which they evidently feel is currently missing.
This letter rattles through common concerns – wanting more incisive decision-making and an end to unnecessary and suffocating red tape to stop investment being stifled. But they're troubles which businesses feel are in need of addressing increasingly urgently.
A new study from the Institution of Mechanical Engineers sheds light on the scale of the problem, warning that under current government policy ‘it is almost impossible for UK electricity demand to be met by 2025’. Demand for electricity is likely to outstrip supply by more than 40% that year, which could lead to black outs.
Difficult new policies to grapple with include the plan for coal-fired power stations to be weeded out by 2025 – coal still provides 29% of Britain’s electricity and finding an adequate replacement is easier said than done. Similarly, the phasing out of old nuclear reactors obviously needs to occur, but it'll heighten the threat of a supply crunch without first having plans in place to build a new set of gas-fired electricity plants (the report says some 30 new ones would be needed to make up the supply deficit).
In fact, the only forms of energy generation the government has showed sustained enthusiasm for in recent years are wind farms and solar panels, which have their place of course, but won't do much to plug the gap by themselves.
Unless the government starts piecing together a convincing long-term plan, businesses will remain uncertain, investment pinned back and the UK's power outlook could be very dim indeed.