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In announcing that a Labour government would freeze energy bills for two years, Ed Milliband has created a year of fear for potential investors in funding desperately needed new generating capacity for the UK. Which investor is going to put up the millions needed for both renewable and conventional plant when the return on that investment has effectively been politicised and put into the hands of a new, unknown body – Ofgem II?
Ofgem I has already sounded serious warning bells about UK’s generating margin falling from about 14% to sub 4% levels around 2016. Introducing the kind of uncertainty that his announcement implies could hardly come at a worst moment; in effect it is perfectly possible that this choice of policy, aimed as it probably was to win votes from the general public, could in fact result in a greater likelihood of brown or blackouts. This is hardly an outcome that will increase the efficiency of industry and the generation of wealth and jobs.
Wholesale energy pricing is a little like the tide – there is no possibility of defeating the ebb and flow of the market and Mr Milliband is going to look a little like King Canute in attempting to hold back world changes in the price of energy. Should the opposition put such an important element of UK’s basic infrastructure under threat without any responsibility for the outcome?
Andrew Eastwell CEO, BSRIA (September 1998 - April 2014)
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