Pressing the reset button

So this week will see the long-awaited ‘reset’ speech from the Energy Secretary Amber Rudd. DECC have been deliberately cagey about when the speech was going to take place with many assuming it would take place after the Spending Review at the end of November.

Ahead of the speech, Rudd and her team briefed the Sunday papers, outlining some of the key themes contained within it. The Energy Secretary clearly states that energy security is a priority. The renewed focus on energy security is an attempt to allay fears of the recent NISM. Although many within the energy sector believe that both National Grid and the market dealt with the tight capacity margin appropriately, there is no denying that this is one of the few times an energy story crosses over into the mainstream.

Renewable subsidies will make up a significant part of the speech.  Rudd will put the blame squarely on both Labour and Liberal Democrat politicians for the profligacy and overspend of renewable subsidies. This is epitomised by criticism of the contracts awarded under the FIDeR programme. This is an exercise of bloodletting and so the speech can do exactly what it intends to do – reset energy policy under a Conservative majority Government.

It is clear that the need to take coal out of the mix will also be a prominent theme in the speech. The attack on coal has become a way for this Government to demonstrate that they are serious about tackling climate change. This is partly done to help mitigate against expected criticism from the green lobby. With Paris COP21 also starting in the next couple of weeks the Government needs a flagship policy to underline its green credentials. However, attacking coal is not universally popular. The closure of steelworks and higher energy bills being cited as an important factor, calls into question carbon taxation and whether taking coal out of the mix right now is the best for UK Plc. We can be sure that this is on the Chancellor’s mind.

So the theme and tone of the speech is becoming clearer. However, the detail and future framework for renewables is not. We will have to wait and see if this speech provides more clarity on the Levy Control Framework and CFDs, or whether this will take place after the event.

Douglas McIlroy

Hill & Knowlton Strategies Search