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…

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…