Investor confidence and the UK energy market

Investor confidence and the UK energy market

52519479 - saving to buy a house or home savings concept with grass growing in shape of house inside transparent piggy bankWhy has investor confidence in the UK energy sector dipped? Simon Hobday, partner at Osborne Clarke, suggests that inconsistency, lack of transparency and unpredictability in government policy remain key concerns.

What is causing this loss of confidence in the UK energy sector?

In a word, politics. The structure of the energy market in terms of support for low carbon generation, including renewables, has been under review in one form or another for the last 12 years. There have been large numbers of changes brought in under the electricity market reform (EMR) programme and new subsidy regimes under the Feed-in-Tarrif (FiT) programme as well as support for small modular reactors (SMRs), but these have been done without any clear direction or logical structure, leading to significant market uncertainty. Take, as an example, low carbon—this has been given a major focus, but questions remain as to how well considered this has been in the context of the overall system. The publication of the ‘Delivering UK Energy Investment: Low Carbon Energy’ report in March 2015 and prior to the EMR results being released, was certainly interesting in terms of its timing, and could be considered a response to the desire to put something in place.However, after the election last year, there was a significant change in emphasis of policy including a roll back of subsidy support. The manner in which this was done was piecemeal with no logical or consistent plan, giving the impression of being a knee-jerk reaction. And it is the way this was done, rather than what

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