Businesses and energy companies have called for the government to provide greater clarity regarding what it is willing to pay for electricity, or risk major investment plans falling through.
According to energy sector leaders, George Osborne should replicate the system used in France and utilise Wednesday’s Budget to provide a clear price for energy production.
For firms and industry in the East of England in particular, such a move from the chancellor would allow them to commit to spending more than the current £80 million earmarked for the region, and avoid having to invest elsewhere.
Clarity is key
According to John Best, head of sustainable energy at marine services company Fendercare, transparency in the market is “vitally important” if investment is to be secured to feed the local supply chain.
“Perhaps the most important message that the chancellor can give out in the budget is any one that underpins certainty,” he told EDP 24.
“This is vital to enable the key long-term investments to be made which are critical to keeping the lights on for UK plc, as we move towards a lower carbon economy.”
Mr Best likened the process to a journey, which he argued will require a “long-term, stable approach” to any matters that will affect future investment, taking into account “the whole balanced mix of energy sources” that feed the energy supply chain through operators, developers and utilities.
The journey ahead
His views were echoed by Decom North Sea (DNS), the offshore oil and gas decommissioning forum, which said much-needed certainty needs to be brought to the growing offshore decommissioning industry in the Budget.
With annual decommissioning expenditure in the North Sea forecast to top £1 billion within a few years, DNS Chief Executive Brian Nixon said the timing and costs of decommissioning are still among the biggest concerns in the UK Continental Shelf.
“If the chancellor confirms tax relief through Decommissioning Relief Deeds – as has been widely forecast – that will be roundly welcomed across the board,” he explained.
“It would mean those operators whose fields are already approaching sub-economic levels are likely to move forward with their decommissioning programmes with greater confidence on the limits of their exposure.”
With the coalition also rumoured to be considering stimulating greater interest and investment in mature fields from independent operators, Mr Nixon said that the industry would be fully behind such a move.
Swift action needed
The starkest warning was issued by James Gray, inward investment director for the East of England Energy Group, who said the current administration had spent “too long” deciding on an electricity price, meaning many firms have no real way of knowing what return they would get from investing in major schemes.
“It is almost like you have the cavalry sitting on the hill waiting to do great things but they are waiting for a signal from government to say off you go chaps,” he told EDP 24.
The simple fact is that companies will not spend a penny in a tumultuous fiscal environment without having an idea about what their return on your investment is likely to be.
“For the government to say to companies ‘this is what you will pay for the electricity’ will guarantee the benefits that we will accrue as a location in the East of England,” he noted, adding that looking across the Channel may be an adequate source of inspiration.
“If we want an example look to the French. The French government decided it wanted to get into the offshore wind sector,” he explained.
The answer will be unveiled when Mr Osborne delivers his budget this Wednesday (March 20th).