Hill+Knowlton Strategies

Although we were bewitched by the glorious pomp and ceremony surrounding the Queen’s Speech today (I particularly liked the tour of  John Bercow’s magnificent bed chamber on the BBC) we did capture the key mesaures for the energy sector and the intial reaction of stakeholders and the media.

Key Bills announced:

• Energy Bill

• This is the Bill which will implement key elements of the EMR package
• The aim of the Bill is to enable large-scale investment in low-carbon generation capacity in the UK and deliver security of supply, in a cost-effective way.
• The Bill will cover three of the four main elements of EMR:
  • Introducing a feed-in tariff with Contracts for Difference (FiT-CfD), a system of low-carbon generation revenue support. The Government’s hope is that the FiT-CfD will provide more certainty of revenues for low-carbon generation and make investment in clean energy more attractive;
  • Introducing an Emissions Performance Standard (EPS) to prevent construction of new coal plants which emit more than 450g/kWh (the most carbon-intensive form of electricity generation);
  • Introducing a capacity mechanism to ensure security of supply, making sure there is sufficient reliable and diverse capacity to meet demand.
• The fourth element, a Carbon Floor Price, has already been legislated for through last year’s Finance Bill.
• The Bill will also create an independent, industry-financed statutory regulator, the Office for Nuclear Regulation, and enable the sale of the Government Pipeline and Storage System (GPSS) (currently a Ministry of Defence asset). The GPSS is a network of pipes and storage depots serving defence installations – see map here: http://www.linewatch.co.uk/pipeline_network.php

• Enterprise and Regulatory Reform Bill

• A wide-ranging Bill covering competition, employment disputes, directors’ pay and regulatory reform.
• It will also establish the Green Investment Bank in law, and equip it with the powers it needs to operate.

Initial stakeholder reactions

1. Business

CBI

John Cridland, CBI Director-General, said: “The test for this Queen’s Speech is whether it will help businesses to grow. Two Bills stand out for me: energy and regulatory reform. The first should help, but the jury’s out on the second.”

On energy: “Let’s be clear, electricity market reform is about keeping the lights on. Business investment in low-carbon will only happen when the detailed market framework is in place. Today’s announcements are an important stepping stone.”

Trade associations

Renewable Energy Association

Gaynor Hartnell, Chief Executive of the Renewable Energy Association – “Four years ago David Cameron said that we can’t afford not to go green and nowhere is that truer than the energy sector. Energy investors are demanding a strong policy framework in support of renewables and a decisive shift away from fossil fuels – so this Bill simply has to deliver. “While it is great that the Government have accepted the principle of legislating for carbon emissions; the way it is currently drawn up simply won’t work. You are not on a diet if you allow yourself 5,000 calories a day. You shouldn’t be surprised if it has no effect.”

UK Green Building Council

Paul King, Chief Executive of the UK Green Building Council – “By reforming regulation of the electricity market, the Government will be able to reduce uncertainty about the future returns from the tens of billions of pounds that must be invested, and will boost the confidence of the private sector. Private investors will also welcome plans to include the establishment of the Green Investment Bank in the proposed Enterprise Bill. However, the Government should recognise that it will slow down investment by the private sector, and hence hinder growth, if it delays giving the Bank powers to borrow.”

Environmental NGOs

The Climate Group

Mark Kenber, Chief Executive of The Climate Group- “Let’s be clear, electricity market reform is about keeping the lights on. Business investment in low-carbon will only happen when the detailed market framework is in place. Today’s announcements are an important stepping stone.”

Political

DECC

As part of her speech the Queen announced that the Government will propose reforms to the electricity market. These reforms will be laid out in the Energy Bill, scheduled for publication on 22 May. Commentating on the forthcoming Energy Bill, a DECC spokeswoman said: “This is crucial legislation. The Energy Bill would reform the electricity market to keep the lights on and emissions down in a more cost-effective way, while reaping the economic benefits.  It is designed to provide investors with long-term certainty and incentives to invest in low-carbon. We will shortly publish a draft Bill for pre-legislative scrutiny, to enable swift passage of well-considered legislation this session. This legislation would reach the statute book by 2013 so that the first low-carbon projects can be supported under its provisions in 2014”.

Caroline Lucas, MP, Green Party

“This is of immense importance to project developers in renewables, as the measures it puts in place will eventually replace the Renewables Obligation. Many of the projects in development now are working to a timescale that takes them into the new regime, and they need to know the detail as soon as possible. If all works as intended, it should make project development less risky and means that the public pays no more than it needs to for green power.”

Academics

Grantham Research Institute on Climate Change and the Environment at London School of Economics

Professor Sam Fankhauser, co-director of the Grantham Research Institute on Climate Change and the Environment at London School of Economics

“We recognise that mechanisms to encourage investment in low carbon electricity generation are necessary, but the cost to the consumer should be the Government’s overriding concern when they are negotiating contracts.

“Transparent and robust processes must be put in place to ensure value for money. Badly- designed policies like the Carbon Price Floor, the Green Deal and the smart meter rollout could cost the consumer billions, it is imperative that this is not allowed to happen with electricity market reform.

WWF

Margaret Ounsley, Head of Public Affairs at WWF-UK, said “There is much that is encouraging here, with legislation to help green the power sector, and to protect our precious rivers and streams; we now just need to make sure that what is being suggested will work.”

Commenting on the Energy Bill, Keith Allott, Head of Climate Change at WWF-UK, said: “Reform of the UK energy market should be one of the Government’s highest priorities. Backing jobs and investment in the renewable energy sector is also a golden opportunity for growth that the government should be grabbing with both hands.”

Initial media reactions

• The Financial Times, Kiran Stacey

Business forms heart of Queen’s Speech

David Cameron and Nick Clegg have pledged to make the UK “one of the most business-friendly countries in the world”, as the Queen outlines dozens of new bills set to dominate the next session of parliament.The prime minister and deputy prime minister said in a statement: “We will continue to extend opportunity in our economy – with an enterprise and regulatory reform bill that will make Britain one of the most business-friendly countries in the world.” They added: “[There will be] a banking reform bill that will clear up the regulatory mess and protect our economy and Britain’s families from the sort of risky activity that led to the recession.” The enterprise bill will encourage employers and employees to go through conciliation rather than legal tribunals as the government looks to help relieve businesses of the burden of some of employment law. The moves fall far short of those advocated by Adrian Beecroft, the Tory donor and venture capitalist, who has said there should be no right for employees to claim unfair dismissal. The bill would make shareholder votes on directors’ pay binding but again falls short of some more radical proposals, which would have forced companies to achieve a 75 per cent majority to approve pay packages.

• BusinessGreen, James Murray

‘Legislation to enable launch of Green Investment Bank also confirmed in annual agenda for next year of parliament’

Setting out her government’s agenda for the next parliamentary year, the Queen said the government would bring forward an Energy Bill that will “propose reform of the electricity market to deliver secure, clean, and affordable electricity, and ensure prices are fair”. She also confirmed plans to introduce legislation that will enable the launch of the government’s promised Green Investment Bank, and plans for a draft water bill to better manage water resources and rivers. There had been reports, strongly denied by the Department of Energy and Climate Change (DECC), that the Energy Bill could be delayed or downgraded as the coalition sought to make room for alternative legislation, such as controversial reforms to the House of Lords. However, the bill was included in the speech as expected and is now set to be put before Parliament in the coming months. The speech did not confirm the precise timetable for the next wave of bills and as such speculation will continue over when the Energy Bill will be finalised, although DECC sources have revealed they remain confident it will be formally published before the end of the calendar year.

• Edie Energy

Queen’s Speech promises commitment on GIB, EMR and water resources

The commitment to introduce legislation to ‘establish’ the GIB is in line with business secretary Vince Cable’s announcement in March this year that the new bank will be headquartered in Edinburgh and that it will be “in a position to be fully operational this Autumn”. The timetable for the GIB to achieve full borrowing status, however, is scheduled to take until April 2015, a date which, even then, is subject to public sector net debt falling as a percentage of GDP. The EMR commitment upholds a previous Government pledge that it would legislate for the key elements of this package in the second session of this Parliament, starting in May 2012. The intention is to ensure that such legislation reaches the statute book by spring 2013, allowing the first low-carbon projects to be supported under its provisions ‘around 2014′. There has, of course, been growing impatience in some industry sectors with the slow progress of the EMR process, including a warning given to Emily Bourne, head of the EMR programme team, when she addressed the Scottish Renewables annual conference in Edinburgh in March this year. Simon Christian, UK managing director of ScottishPower Renewables, said at the time that uncertainty over EMR was effectively blocking projects timed to start beyond 2017, due to future revenue uncertainties. The Queen’s Speech declaration on EMR today, however, went no further that to confirm that legislation would be introduced to “deliver secure, clean and affordable electricity and ensure prices as fair”. The commitment on water resources was equally brief, committing to the publication of a draft bill to “reform the water industry in England and Wales