… here’s a copy of my presentation to the Sustainability Live Conference on sustainable business from last week:
When something happens that you knew was going to happen, and its as bad as you thought it would be, there ought not to be any additional sense of surprise or concern attached to it. It’s happened; it’s bad; you knew it would be, so what’s new?
But there usually is, if only that what has now happened sweeps away any putative alternatives, and then you’ve got to get along with the reality.
This is where we are with the Energy Bill, published this week. I knew it probably would be published around now, and I knew it would probably be very thin and unformed, and I knew that there would be a great deal of work to be done to get it into any sort of shape to address the issues it claims to do.
I’m still slightly taken aback at just HOW thin it is. The draft bill consists of 109 clauses, 44 of which are concerned with the establishment of the Office of the Nuclear Regulator. Seventeen deal with selling off the government strategic pipelines (?) and miscellaneous bits and pieces, and nine clauses set up a ‘strategy and policy’ statement to be set out each year, leaving just thirty nine clauses for everything discussed in the White Paper and all the EMR reform supposedly required. Not only that, but of the ten schedules set out in the draft bill, only three deal with anything other than the Office for Nuclear Regulation and associated odds and sods.
And… it gets worse. Of the thirty nine clauses dealing with what one might call ‘actual EMR’ six go about setting up what are called ’Investment Instruments’ which are, not to put too fine a point on it notes of comfort for nuclear generators ahead of the actual date on which Contracts for Difference can actually start. They certainly won’t be notes of comfort for anyone else, because they will all be able to obtain Renewables Obligation Certificates until 2017: so a whole section devoted to shoring up EDF ahead of whatever else comes out of the Bill.
This means, of course that most of the business of making EMR work will be the subject of secondary legislation, most of which still seems to be under intensive discussion. Here’s the sole substantive entry on demand side response and management in the whole Bill, for example (sorry, correction: it’s not actually in the Bill, but might be, …or might not. The mention is in the preamble piece to the Draft bill):
‘…we are currently reviewing the potential for incentivising further demand reduction in the electricity sector. This work will report over the summer, in time to fit legislative timetables, should it be required.’
This sort of mention and a number of other hanging ideas and items in progress (such as who if anyone is actually going to be the counterparty for CfDs), make one wonder exactly what it is that the Energy and Climate Change Select committee will actually be scrutinising in the five weeks it has got to do the job before summer. Not much by the looks of it, since most of the meat of scrutiny is still locked in someone’s drawer waiting to be worked on. I would imaging that, if the Select Committee does its job properly and takes the three to four months on pre-legislative scrutiny recommended by Cabinet Office guidelines, then it will be accused of holding the progress of the bill up, but if it doesn’t most of the content of EMR will tunnel past it underground, emerging only once ‘scrutiny’ is over and the committee can be prayed in aid of whatever emerges. Not a happy prospect either way.
Well, Electricity Market Reform and the legislation necessary to make the Green Investment fund into a Green Investment Bank (eventually) have both crept into the Queens speech, which means we will have legislation on these matters sometime before the middle of next year. As far as electricity Market Reform is concerned, exactly when during the next year a bill gets underway, and what it is likely to consist of in the end is looking increasingly interesting.
Why? Because any serious delay in putting something in front of the House risks some fatal timetable delays in putting in place the heath-robinson contraptions that will ‘frame’ the new worlds of delivering ‘secure clean and affordable electricity’ (as the Queens speech puts it). It will be difficult to issue legally workable ‘contracts for difference’ as it stands, but rather impossible if the legislation is not there in time to do so.
But herein lies a dilemma. The scribes below DECC are working overtime to write the bill up in a coherent form, and are still some way from doing so, I understand (publication of a ‘bill’ on May 22nd notwithstanding). But in the meantime, rapid shifts in reality drain the words off the page. I’ve previously alluded to the difficult writing task that the revised version of the revised version of CfD counterparty agreements will present: and just as the shape of the reforms gets boiled down into something approaching English, so the purpose of much of it (to subsidise new nuclear without appearing to do so) is falling away before our eyes.
I am not sure how widely the near meltdown of UK nuclear policy is currently understood by the wider policy community: I am sure DECC appreciates it internally, even though it has to smile and whistle (and probably throw in a bit of pantomime mugging for good measure) as the policy drifts off down the swannee. Two pieces in the last two days in the ‘Times’ throw some light on this. The headlines tell their own story (both behind paywall). The first one: ‘soaring [capital] costs threaten to blow nuclear plans apart’ (£) – recounts how the likely price of EDFs two nuclear reactors (as I set out previously here) the only ones left that are likely to be built currently) will rise to £7 billion a go. What the piece doesn’t say, but I will, is that the ‘levelised’ cost of nuclear power as compared with other forms of electricity, currently projected to be cheaper than most, depends entirely on estimates of capital cost and reactor build times, because of the extreme capital top-heaviness of nuclear energy. So as ‘costs soar’ and timetables become increasingly stretched out, so too should estimates of cost of delivered power, which I think we’ll find is now running at among the most expensive rather than the cheapest power option. The second piece ‘French elections may leave nuclear no longer an option’ (£) reflects on the probable course of energy policy in France following the election of Francois Hollande, and its effect on the already cash-strapped government–controlled EDF.
Put all that on top of the collapse of the Horizon consortium and the picture is looking very bleak indeed. (I did mention ‘Russian Oligarchs’ as the only likely interested parties in buying the assets of the consortium as a joke at the time, but now it looks like it might be true in the shape of the Russian State Oil corporation, along with possible Chinese interest… hmm). Meanwhile, the government has announced today after the Queens speech that ‘The energy bill will be published on May 22nd for pre-legislative scrutiny.’ It will be interesting to see just how complete the bill is at that point. Not very, I think will be the answer. It will arrive in the form of an incomplete draft bill, scrutinised perhaps over two months by a select committee, and not ready to be introduced as an actual Bill until late Autumn at the earliest. But even with this process, much of the die is cast as to structure. The urgent rethink clearly now needed on nuclear policy will have to take place just as the architecture of the previous arrangements becomes cast in stone. Rethink and possibly crash the timetable for EMR, or don’t rethink and produce an on-time turkey that isn’t fit for purpose. A dilemma indeed.
UPDATE: Since I wrote this, DECC have mysteriously removed the date of May 22nd for the publication of the EMR Bill from their website and replaced it with ‘We will shortly publish a draft Bill for pre-legislative scrutiny, to enable swift passage of well considered legislation.’ Since May 22nd is normally understood to refer to a date (in this case May 22nd) and ‘shortly’ is a well-known Parliamentary term for ‘when we get round to it,’ maybe this change is less mysterious than appears at first sight.