Hill+Knowlton Strategies

I think I should start this post by telling you what’s special about the photo above. At first glance it may look like a really dry and boring snap of a Commons select committee hearing. However, if you look closely you can see me! Isn’t that exciting? I may need a haircut, but I’m still pretty pleased to have been caught on camera, given how exciting a trip to Parliament always is.

In any case, this shot was taken at the Energy and Climate Change Committee hearing this morning. The Committee was continuing its inquiry into new-build nuclear programmes in the UK following the withdrawal of RWE npower and EON from the Horizon project. Today, the chiefs of these companies – Volker Beckers and Dr Tony Cocker, respectively – gave evidence. This was followed by evidence from DECC Minister Charles Hendry and Hergen Haye, DECC’s Head of New Nuclear & Strategy.

The hearing was interesting for a couple of reasons. Firstly, it was fascinating to hear first-hand the precise reasons for RWE and EON’s withdrawal from their plans. It was interesting to hear both companies state that there is no way that they’ll be reversing their decision to withdraw. However, they said that they feel the UK has one of the best investment frameworks around. They praised both the current government and the previous Labour government for their efforts to encourage investment in the sector, and singled out Contracts for Difference (CFD) as a particularly promising aspect of the Electricity Market Reform. Dr Cocker even went so far in his praise for the notion of the CFD as to say that EON felt so confident that the CFD would resolve the issue of uncertainty around electricity prices that it didn’t feature in the decision to withdraw.

It was also interesting to hear that both EON and RWE, and the Government feel confident that they will find a buyer for Horizon. The Committee expressed concerns that have been shared in the media recently about the possibility of foreign (read Russian or Chinese) ownership of a piece of the UK’s energy infrastructure. However, neither company, nor the Government shared these worries. Rather, they said nationality is of secondary concern in such dealings, with the primary factors being a candidate’s prior nuclear experience, safety and security practices, and financial viability.

We’ll certainly be following this issue very closely. If you’d like to watch today’s proceedings for yourself, you can do so here.

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.