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Energy Market Update – 27th July 2015

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Energy is a very hot topic! Everyone has a view on some aspects but overall these are very diverse. Some years ago I was involved in a focus group headed up by the Energy Institute and supported by various government departments under the then minister, Malcolm Wicks.

The group was looking ahead at ways to get the message of the dangers of climate change through to the general population to bring about a change in attitude. There was a general acceptance that most people were concerned about the environment and this was taken from the fact that, when asked if they cared about the environment, most said that they were.

So, on that basis the discussions proceeded along the lines that we should educate the children to instil the message into the “hearts and minds” of their parents. I tried to add the word “pockets” to this, indicating that the same people, when asked if they would like to pay more for this, would probably say “no”. Several times during the session I reiterated the point and each time it was either ignored or removed.

Therefore, some years later, I was not surprised to hear that consumers were having difficulty in understanding why overall prices were rising when wholesale prices were falling! Naturally, suppliers were blamed, but once it became known that environmental taxes were the culprit, the government realised at last that most of its voters did not want to pay to save the environment. So, late in the day, there is finally a realisation that subsidies given have to be paid for by those that do not receive them! As more receive subsidies, the higher overall cost is paid for by the remaining consumer who sees no benefit at all!

Now, following the statement made by Amber Rudd, Energy Secretary, that some subsidies will be limited or capped, it seems that the government appears to be taking some action to reduce overall costs further. The Chancellor has followed on with plans to restructure the subsidies to the renewables industry, particularly wind and solar. We shall know more of this once final plans have been announced and the true implications are made known for consumers, whether domestic or industrial and commercial.

What all of this serves to demonstrate is that there is a cultural gap between what voters understand and expect and the policies the government plans to implement. This is the ideal point to discuss the Energy Barometer 2015, published recently by the Energy Institute.

The Institute commissioned the study to understand and analyse the views of its members working across the energy sector. For those of us invited to contribute, it gave us the chance to give our views on a wide range of topics initially lead by a range of strategic questions. What is interesting is that the views published have in some respects differed from the perception of policies that the government has decided to implement. This, in my view, illustrates the risk involved in appointing a minister to a role without previous knowledge or experience. Furthermore, as most ministerial positions change frequently, there will also be a further risk from the lack of consistency. In other words, a “stop, start” policy as ministerial roles are frequently changed!


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