Hill+Knowlton Strategies

So, it seems there will be an announcement tomorrow morning on whether the Energy Secretary Chris Huhne will be prosecuted. This bring to an end months of speculation over allegations that Huhne asked his former wife to take speeding points on his behalf.

Nick Clegg has already made it clear that if charged, Huhne will have to step down, prompting speculation on who will replace him on the energy and climate change brief. The quota of Liberal Democrat ministers will of course need to be maintained, narrowing it down somewhat. Junior business minister Ed Davey appears to be the front runner, with junior Foreign Office Minister Jeremy Browne and former Treasury Secretary David Laws also mentioned in passing.

The Coalition Government has been under fire recently for backsliding on environmental policy, with even key initiatives such as the Green Investment Bank, feed-in tariffs and the Green Deal falling victim to a strong Treasury keen to keep public spending to a minimum wherever possible.

Of the three contenders named above, two contributed to the Orange Book of 2004, widely regarded as the manifesto of the right wing of the Liberal Democrats. If tomorrow does mark the end of Chris Huhne’s cabinet career, all eyes will be on his successor for any hint that the ‘greenest government ever’ is not living up to its name…

It has been an age since my last blog and on the energy front things have been busy. The Statoil campaign in the UK has kicked into gear, we’ve had the Electricity Market Reform, release of strategic oil reserves (good blog from Platts yesterday), increased retail energy prices in the UK and continued debate about the future of nuclear in different parts of the world.

In the world of media too things have changed. Of course we no longer have the News of the World on our newsstands, but we have a new social network to play with in Google+ and apparently there are already 10 million users (for those interested I’m at http://gplus.to/chrispratt). We also had the launch of the Huffington Post in the UK, and the subsequent debate in the journalist twittersphere about unpaid content and commentary.

Personally speaking the pace of things at work and at home (moving into new house) has precluded much else, but the train journey has allowed me to make a start on the new book by Tom Bergin , Spills and Spin, about BP’s Macondo spill and the changes at BP under Lord Browne and Tony Hayward, which according to Bergin had created an environment more comfortable with risk than perhaps an oil company should be. It’s an interesting perspective and I look forward to the week off next week that will allow me some time to finish the book.

I’m also looking forward to reading more about the fallout from the EMR. One thing is clear about the reforms and that is that energy prices will increase to foot the bill for the investment in our national infrastructure. What the bill will be and how much the average energy consumer will have to pay, nevermind the extent to which heavy industry can afford to stay in the UK, will be the subject of much debate as the Government starts to provide the clarity required to make the calculations. From a communications perspective therefore much remains to be done as consumer groups, businesses, energy companies and Government line up for what will be a time of challenging messages. Something to think about on the beach? Probably not, but maybe when I get back.

The sun shone on Monday during my visit to Aberdeen to meet with representatives of the offshore energy industry in the Granite City, but the general mood of the industry appeared more glum under the gathering rainclouds of increased regulation and the changes to the offshore production levy.

The current consultation by the European Commission into offshore drilling may well be a pre-cursor to additional regulations for an industry still integrating learnings from the fallout of last year’s Gulf of Mexico spill. The key question will be the extent to which any new regulations place additional burdens (and costs) on an industry that has for many years set the bar for world offshore HSE standards.

There was an encouraging appetite for making contributions to the consultation among those that I met with, but evidence too that many were planning to make only collective submissions, which often has the effect of watering them down. What is clear is that DG ENER at the Commission are keen to review offshore drilling regulations and that such a consultation regularly results in regulatory changes. Now is the opportunity to engage in the process to avoid any nasty surprises.

Speaking of which it is clear that the energy industry operating on the UK Continental Shelf is still reeling from the changes to the offshore production levy introduced in April’s Budget. It seems that there are fresh headlines every day as different organisations up the ante and review investment decisions as a result of the changes. Certainly Energy Secretary Chris Huhne’s meeting with the Energy and Climate Change Committee yesterday has done little to settle industry concerns at the apparent intrasigence of the Government on this issue, especially when it comes to gas production and marginal fields. Although according to some the result of the AV referendum could bring about some changes.

This is an issue that we expect to run and run in the coming months, but I hope the storm clouds lift for long enough that we can enjoy some of the beautiful sunshine that is forecast.

While the Chancellor’s freeze on fuel duty is likely to grab the headlines, on deeper reflection this afternoon’s Budget announcement is indicative of the Coalition Government’s struggle to fulfil its goal of reducing emissions at the same time as it looks to squeeze spending.

With DECC and the Treasury having fought a running battle over the Green Investment Bank’s ability to raise funds, it looks – as had been anticipated – as though the Treasury has got its way. This will undoubtedly be viewed as a setback for Secretary of State for Energy and Climate Change Chris Huhne, and his Liberal Democrat colleagues.

So much for ducks quacking and banks borrowing eh?

Worries about rising energy prices are also behind the decision to slash the CCS Levy, while the Government has clearly taken note of the need to incentivise the Green Deal at a time when most consumers are more concerned with making ends meet than lowering their carbon footprint (a subject that Huhne spoke about at the launch of the CBI report ‘Making the Consumer Case for Low Carbon’ which was held at H&K 2 weeks ago)

In this context, green campaigners and investors in green technology look set to be disappointed. Many have already begun to argue that the carbon floor price will not drive investment into the more conceptual forms of clean energy or improved efficiency at the proposed level. Nuclear looks like the winner in this regard at the moment, but events in Japan may well put the brakes on the new build programme in the UK as they have elsewhere.

Ultimately for all those involved in the energy sector, whatever their sentiment towards today’s announcements, the 2011 Budget serves as a stark reminder of the difficulties that lie ahead for the Coalition in its quest to become ‘the greenest government ever’ in an age of austerity.

H&K were fortunate enough to have the opportunity to host a very interesting event by the Confederation of British Industry (CBI)yesterday morning. The event was not only one of the first outings of new Director General, John Cridland, but also featured Secretary of State at the Department for Energy and Climate Change, Chris Huhne MP in one of his first outings since the launch earlier this week of his government’s Carbon Plan. The CBI used this event to share some insights about consumer attitudes toward ‘low carbon economy’ products and initiatives and from a communications perspective the conclusions gave some food for thought. First though some really useful stats from the CBI report entitled ‘Making the Consumer Case for Low Carbon’:

•  Three quarters of the UK’s greenhouse gas emissions are either directly or indirectly attributable to consumer actions (Sustainable Consumption Institute)
• Seven out of ten people feel a sense of responsibility to do something about climate change (Ipsos MORI, March 2010)
• 39% of respondents to Ipsos MORI said that ‘clear evidence of reduced running costs’ would change their purchasing attitudes toward more energy efficient products
• 83% of respondents either strong agreed or tended to agree with the statement that ‘companies have a responsibility to give consumers as much information as they can about the energy efficiency of the products they sell’.
• When asked about which sources of information they trust to provide reliable information about energy efficiency or climate change, 40% said Which? Magazine, 30% Government or Government agencies, 28% scientists, 16% action groups like Greenpeace, 16% manufacturers, 12% trade associations. 9% newspapers, 9% TV and 9% retailers/shops. There were striking differences between different age groups too.

So what was so interesting from a communications perspective? Well one of the overriding messages that Mr Cridland was sharing with the audience and his members was that they had a challenge to communicate better with consumers if they were to convince them that low carbon products were worth their consideration.

When the leadership of an organisation like the CBI starts to make statements like this it can feel like manna from heaven for a communications specialist, especially when they conclude by saying that this is about more than spin and offering worthy but premium priced alternatives, it is about creating compelling price points and standards that consumers can trust. I couldn’t agree more and so look forward to working with our clients to define compelling low-carbon propositions for consumers. With the launch of the government’s Carbon Plan, policy appears to at last be providing a relatively clear path for more investment by business in the low carbon economy. Let’s hope the joined up approach continues.

Originally planned for the autumn, the Government’s long-awaited proposals for the reform of the electricity market have finally arrived today. As the months went by, it emerged that the Government was using today’s announcement as a vehicle to address a broader and broader range of issues. This, combined with the late involvement of the Treasury, has held up work. Has it also meant an incoherent package of measures?  

Energy Secretary’s Huhne’s statement underlined the dilemma facing the Government – on the one hand it wants to attract inward investment in low-carbon energy, but has to balance this with keeping the cost of electricity low for consumers. In other words, incentivise developers, but not over-incentivise them…

Let’s take one of the principal elements of today’s package, a proposed carbon price floor. It is not surprising that the Treasury is leading on this. From a public spending perspective, it is win-win – the nuclear sector is incentivised, and the Government can publicly say it has stuck to its pledge of no public subsidy for nuclear new-build. However, generators will have to re-coup the huge cost somehow – higher customer bills would be the easiest way to do so…

A move away from the current Renewables Obligation (RO) to a system of Feed-In Tariffs (FIT) is another of today’s proposals. Whilst this may well result in lower consumer energy bills, in the case of offshore wind it may not incentivise investment. FIT systems favour small developers, yet the sites that have most recently been leased are far from shore, deep, with rough sea conditions. Only large developers will have deep enough pockets to develop these sites, and they are used to the RO…

Interested parties have until mid-March to give their opinions on the proposals; DECC can expect a full inbox…

One area where the Coalition government has stuck to its guns has been the issue of public subsidy for a new-generation of nuclear power stations – there will be no money.

The cost of decommissioning nuclear plants, and disposing of nuclear waste, has become a huge financal millstone around the neck of the government, as Chris Huhne made clear in his speech to the Liberal Democrat conference this year.

The Government’s mantra was continued in the consultation launched this week by DECC. In it, DECC sets out detailed proposals aimed at ensuring that the taxpayer is not on the hook for the cost of decomissioning or waste disposal in the future. In a nutshell, nuclear plant operators will be expected to make sufficient financial provision for decommissioning and disposal of waste from day one.

The question remains whether any potential operator has deep enough pockets to go ahead on this basis or whether, with energy security concerns becoming ever more pressing, the Government will fudge the issue by e.g. setting a minimum price for carbon. DECC is expected to launch a wide-ranging consultation on electricity market reform next week, which is likely to address a floor price for carbon among other issues; the small print will be keenly scrutinised…

‘We are in the game!!!’ roared Simon Hughes, very excitedly, as he tried (perhaps a little too hard) to convince the Lib Dem conference (and the media, no doubt!) that he is, in fact, a ‘rock solid’ supporter of the coalition. It is this sense of being ‘in the game’ after 65 years in opposition that has gone a long way to appease Hughes and many-a-concerned party activist’s worries about the coalition government over the last six months.

Still, with great power inevitably comes great expectation, and with green issues seen as the heartbeat of the party by many, Chris Huhne, the Secretary of State for Energy and Climate Change, addressing conference for the first time in his new role, was always going to be under great scrutiny by the masses In Liverpool this week.

In his speech to conference yesterday, supported by a carefully co-ordinated series of fringe events, Huhne set about outlining the coalition’s plans to tackle what he described as ‘the greatest challenge across Whitehall in peacetime’.

Addressing climate change, he said, is this Government’s most pressing task in the years ahead, while the UK’s overdependence on big oil means future price fluctuations have the capacity to drain billions from the UK economy. The two interrelated threats would be tackled, he said, by the ‘four pillars’ of the coalition’s energy policy:

1. The ‘Green Deal’ will see companies paying to insulate every home in Britain, allowing them to save both energy and money.
2. A ‘third industrial revolution’ of low-carbon renewable growth will wean the UK off fossil fuels and fulfil the country’s need for more electricity going forward (demand for electricity is expected to double by 2050).
3. Nuclear energy, funded entirely by private industry, will give the UK greater energy security.
4. Clean coal and gas will account for renewable energy’s variability and provide the UK with protection from future oil price shocks.

As I wrote yesterday, Huhne had two major challenges as he made his way to Liverpool this week. On the one hand, he needed to simultaneously reassure activists in his own party over their worries about nuclear while appeasing Conservative cabinet colleague’s concerns about the UK’s future energy security. In addition, he, like the rest of the Lib Dem leadership, needed to convince his party that liberalism has not been nullified by conservatism in the coalition.

It was interesting to see how he approached both.

‘A deal is a deal’, he said of nuclear, with a nod and a wink to the Tories during his speech to conference yesterday. Throughout this week, Huhne has spoke off ‘ending the standoff’ on nuclear energy and has insisted that he is ‘entirely comfortable’ with the coalition’s position on the issue. On first glance, it would seem like he has conceded much ground to the Conservatives on the issue, yet, having witnessed his less publicised conversations within small fringe meetings, I’m not sure that all is necessarily what it seems.

Speaking to worried party members in close confines, Huhne has been at pains to point out that £1.7bn of DECC’s £3.2bn annual budget is spent on clearing up after past generations who were lax on attributing responsibility for nuclear decommissioning. This, he says, is damn-right unacceptable. The great worry over nuclear amongst the Lib Dem faithful is that nasty corporate giants will invest in projects in the short term, before swanning off and leaving little old communities and the humble tax payer to pick up the tap for decommissioning. “No hidden subsidies for nuclear!” declared Huhne in his speech to conference yesterday, a pointed hint that he is on top of the issue.

Huhne addressed his second challenge by attempting to give the Lib Dems ownership over green coalition policy, just as Nick Clegg had done with a range of coalition policies in his speech on Monday. By linking energy and climate change policy with wider social issues – such as poverty, unemployment and consumer rights – he was able to relate coalition energy policy to classic Lib Dem values like internationalism, localism, and, most notably, fairness. Discussion of the Green Deal, for example, was hampered with footnotes over how reducing energy waste could help advance society by lifting people out of poverty.

With next year’s local elections approaching fast, Huhne has bolstered Lib Dem party stalwarts green arsenal as they take to the doorsteps, while he has addressed the nuclear issue with enough subtlety and craft to keep a number of competing voices at bay.

Big smiles all round then? Well, yes, but Chris Huhne will know that much more difficult challenges are yet to come. Giving ownership of green issues to a party full of environmentalists was never likely to be an overly hard sell.

Green plans are all well and good, but convincing investors, businesses and consumers to pick up the tab for the transition to a low-carbon economy will be much trickier, especially when the coalition’s spending cuts start to bite.

Departing Liverpool this week, Huhne will have reason to be positive. Equally, he will know that he has hardly scratched the surface of Whitehall’s ‘greatest ever’ peacetime challenge.

As conference season kicks off with the Liberal Democrats in Liverpool, there’s something in particular that I am looking for in the multitude tweets and updates from colleagues and others that are on the sidelines this week. That is the coalition intentions with regards renewable energy subsidies and support.

On Thursday this week the FT tells us that energy minister Chris Huhne will be launching the world’s largest wind farm. The London Array will eventually consist of 341 turbines generating 1,000 megawatts of electricity off the coasts of Kent and Essex in the South East of England, paid for in part by Masdar, the Abu Dhabi government’s initiative to encourage development of green technologies. No doubt the launch will be subject to a fanfare celebrating the UK’s leadership in renewable technologies. However, as Christopher Booker’s editorial in yesterday’s Daily Telegraph suggests there will be many others lamenting the cost that subsidies place upon  energy users at a time that they can least afford it.

The next few quarters will be critical to the success of maintaining existing energy policy. As the spending review is rolled out and cuts begin to bite, taxpayers may well start to question their inflated energy bills, which the DECC expect to increase by 33% by 2020, and their commitment to some of the most ambitious renewable targets in the developed world. Let’s hope for the coalition’s sake that this is not compounded by a harsh winter.

‘It’s the same old Lib Dem conference, except this year it feels … different’.

Those were the words of David Grossman as he recorded footage for Newsnight following Nick Clegg’s speech to the party faithful yesterday. He’s right.

Despite significant losses in recent opinion polls, this year’s conference in Liverpool has attracted more people than ever before – 6000 are said to have descended on the city this week. Largely though, the increase in numbers is a product of a dramatic rise in business and media interest rather than an inflated number of party members.

Sure, the bearded, sandal-wearing loyalists remain, but they have been diluted by a mass of suited young corporate types. Meanwhile, paparazzi swooped on Nick and Miriam Clegg in a manner that would have been quite unheard of six months ago. As ordinary members make their way through new airport-style security, they seem a little uneasy that their annual get together has been gatecrashed.

Still, they’ve got bigger fish to fry. As is well documented, Lib Dem activists are increasingly concerned that their leader has jumped into bed with the Tories, with many grumbling that Clegg, a centrist ‘Orange book’ Liberal, has become disconnected with the left-leaning mainstream.

Yesterday morning, The Guardian’s Patrick Wintour argued that, in order to proclaim this year’s conference a success, Clegg needed to do two things. He must reassure the party that liberalism is not being crushed by the ‘juggernaught of Conservatism’ within Government, said Wintour, all the while restating the cause for the deficit programme in a convincing manner.

Not easy. And it didn’t get any easier. By early afternoon the party’s leadership had been defeated in a conference vote over their support for ‘free schools’ on the grounds that a currently ‘unfair’ school system would be made more unequal under coalition plans, worsening educational outcomes for the majority of children.

The stage was set for Clegg, and, despite an outright refusal to criticise his Conservative coalition partners, an upbeat and defiant speech saw the leader leave the main auditorium at Liverpool’s ACC to a rapturous standing ovation. ‘Stick with us’ he said, urging the party to ‘hold our nerve’ and play the long game. A list of liberal achievements in power precluded a staunch defence of coalition plans to cut the deficit immediately. The 2010s, he said, would not be a return to the 1980s. This time around, public sector cuts will be made on a practical rather than an ideological basis, and will be intertwined with a sense of ‘fairness’.

Some, undoubtedly, will remain sceptical, especially with the argument over the timing of cuts (given the leader’s u-turn on the timing of deficit-reduction measures). Nonetheless, Clegg did succeed in generating a feeling of euphoria with the faithful that has not been seen since the lofty days of ‘Cleggmania’ during the general election campaign. While his words will be painted by many outside the party as desperate pleading, to a membership that has waited so long to taste power, they were received as a welcome unifying battlecry.

Clegg departed the conference last night as the UN beckoned. But the show will go on. Today, the Energy and Climate Change secretary, Chris Huhne, will take to the stage as he looks to showcase the coalition’s record on green issues. A range of energy-related fringe events are set to provide the perfect backdrop.

With environmental activism the apple of many-a-Lib Dem eye, there is sure to be close scrutiny. Nuclear will undoubtedly remain the elephant in the room. While the party remain opposed to the development of nuclear power stations, the coalition is encouraging private investors to drive nuclear new-build despite a reluctance to subsidise investors with public funding.

Speaking on a panel that included EDF CEO Vincent de Rivaz, Huhne last night reiterated that he ‘is not theologically opposed to nuclear’. But many in the party are. Huhne will have to tread carefully on this thorny issue, all the while considering the pro-nuclear views of his Conservative colleagues in Government. Having rattled a few Tory feathers already this week by expressing his opposition to a like-for-like replacement for Trident, he is likely to want to play down the nuclear issue as much as possible.

Elsewhere, members are concerned that the party is not doing enough to push green issues in Government. With next year’s local elections drawing ever closer, local party stalwarts are pushing for a radical environmental campaigning platform. Yesterday the rank and file pushed through an amendment to a policy motion on ‘green taxation’ that set a target of securing no less than 10% of its taxes from environmental revenue by 2015. Ministers had urged voting members to pass the motion with no amendment.

Huhne’s challenge, then, is to build on Clegg’s speech yesterday, showcasing a radical liberal commitment to green issues that sets the party apart from the ‘Conservative juggernaught’. For a party still basking in their first taste of power, this is likely to be enough to quieten dissenting voices over the deficit-programme for now. Nevertheless, as rhetoric takes a back seat to tangible cuts over the next twelve months, next year’s conference may be a different story.