UK Conservatives champions shale gas and electric cars

UK Conservative leader and Prime Minister Theresa May set out her party’s General Election manifesto on Thursday and it expressed a strong backing for shale gas and electric vehicles.

Meanwhile representatives from the nuclear power industry have told Power Engineering International they believe the manifesto is positive towards their sector despite not being mentioned in the document.

The party aims to have the lowest energy prices in Europe and has plans in place to make shale gas more palatable to affected communities.

Planning processes for shale developments would be streamlined and a higher share of tax revenues, paid into a national “shale wealth fund”, would be given to local communities in a bid to overcome grassroots opposition to fracking.
Theresa May
The Conservative manifesto claimed that Britain had the potential to have a similar ‘shale revolution’ as being experienced in the US, a technological development fiercely opposed by the Labour and Liberal Democrat opposition parties.

The party also promises an independent review into the cost of energy to ensure UK energy costs are as low as possible, while ensuring a reliable supply and meeting 2050 carbon reduction objective.

UK Conservatives champions shale gas and electric cars


UK Conservative leader and Prime Minister Theresa May set out her party’s General Election manifesto on Thursday and it expressed a strong backing for shale gas and electric vehicles.

Meanwhile representatives from the nuclear power industry have told Power Engineering International they believe the manifesto is positive towards their sector despite not being mentioned in the document.

The party aims to have the lowest energy prices in Europe and has plans in place to make shale gas more palatable to affected communities.

Planning processes for shale developments would be streamlined and a higher share of tax revenues, paid into a national “shale wealth fund”, would be given to local communities in a bid to overcome grassroots opposition to fracking.
Theresa May
The Conservative manifesto claimed that Britain had the potential to have a similar ‘shale revolution’ as being experienced in the US, a technological development fiercely opposed by the Labour and Liberal Democrat opposition parties.

The party also promises an independent review into the cost of energy to ensure UK energy costs are as low as possible, while ensuring a reliable supply and meeting 2050 carbon reduction objective.


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Despite the focus on affordability, the manifesto called for Britain to remain “at the forefront of action against global climate change” and reiterated a commitment to cutting greenhouse gas emissions by at least 80 per cent from 1990 levels by 2050. A goal for “almost every car and van to be zero emission by 2050” was renewed, together with a pledge to invest £600m by 2020 to help develop electric vehicles.

The manifesto expressed support for the UK’s role as a “global leader in offshore wind”, while continuing to demonstrate opposition to onshore wind.

In line with the principle of affordability, the manifesto omitted mention of nuclear power and said only that the UK’s post-Brexit energy policy would be based “not on the way energy is generated but on the ends we desire — reliable and affordable energy”.

Nuclear power has come in for criticism due to its association with high costs.

This represents a shift away from technology specific targets such as the EU goal for 15 per cent of overall energy to come from renewables by 2020.

Among the other elements to the Tory party’s proposals were to establish an industrial energy efficiency scheme to help large companies install measures to cut their energy use and their bills. It was also proposed that smart meters be offered to every household and business by the end of 2020.

Bodies such as Greenpeace as well as particular media outlets have pointed to the omission of nuclear power in the Conservative’s document as indicative of a negative attitude by the party to the sector, however nuclear interests appear unperturbed.

In a statement to Power Engineering International on the subject Dr Jonathan Cobb, Senior Communication Manager with the World Nuclear Association said, “The Conservative manifesto is notable for not making specific policy statements about any form of electricity generation, other than a negative statement on onshore wind in England.”

“Nuclear stands well to contribute to the diverse energy mix outlined as an objective, and can contribute strongly to meeting all aspects of the policy.”

“More significantly the track record of the current Conservative government has demonstrated strong support for nuclear energy. The support for nuclear energy expressed in both the Labour and Liberal Democrats manifestos indicates there will be good cross-party support for nuclear energy in the UK in the next government.”

Tom Greatrex, Chief Executive of the Nuclear Industry Association, added to that positive interpretation of the manifesto, telling Power Engineering International, “The NIA welcomes the Conservative Party manifesto commitment to meeting our international climate commitments and the need for a secure and reliable power supply for the UK’s homes, businesses and public services. Whoever forms the government after 8 June will need to ensure those objectives are met, and as the current Government’s industrial strategy identified the civil nuclear industry as an early candidate for a sector deal, it is clear that the wider industrial and economic contribution nuclear makes is also appreciated.”

“With two thirds of the country’s despatchable generation capacity retiring between 2010 and 2030, and all but one of our nuclear fleet, the replacement of that capacity will continue to be a priority for the new Government. Nuclear provides secure, reliable, low carbon power and is not reliant on the weather or exposed to the volatility of fossil fuel prices. It forms an integral part of a logical, rational and sensible balanced energy mix, and will continue to do so in the UK.”

E.ON Chief Executive Officer Johannes Teyssen is seen during the annual shareholders meeting in Essen, Germany May 10, 2017. REUTERS/Thilo Schmuelgen

UK energy tariff cap a chance to develop new products – E.ON CEO

Britain’s plan to introduce price caps in the energy retail market will be a “challenge” but also a chance for one of the country’s biggest suppliers to develop new products in a very competitive market, said the chief executive of E.ON (EONGn.DE).

Britain’s Conservative Party, leading in polls to take a larger majority in next month’s election, has pledged to cap standard energy tariffs, while the opposition Labour party has proposed nationalising some energy firms.

E.ON group CEO Johannes Teyssen said a price cap would unlikely have any impact on E.ON’s current portfolio.

“It’s an opportunity to define and develop new products, it’s a challenge for us,” Teyssen said on the sidelines of the FT Energy Transition Strategies conference in London.

E.ON, whose British unit saw profits plunge 43 percent in the first quarter, is ramping up sales in Britain to gain new customers in a market where large suppliers have seen fierce competition from new entrants.

(Reporting by Karolin Schaps; Editing by Elaine Hardcastle)

Conservatives turn to energy costs as price cap plans appear to soften

The Conservative party is expected to dilute the threat to energy suppliers with watered down plans to cap bills ahead of a fresh review into the rising cost of Britain’s electricity.

The Tory party said its ambition is for Britain’s energy costs to be the lowest in Europe, and its manifesto included plans to reignite the shale industry by offering a bigger slice of a sovereign wealth fund to those who welcome local drilling.

The impact for the industry may be much less than we fearedDeepa Venkateswaran, an analyst at Alliance Bernstein

“We want to make sure that the cost of energy in Britain is internationally competitive, both for businesses and households,” said the party.

The pledge made no mention of the £100 savings for 17 million customers promised by Theresa May earlier this month.

has energy price cap as expected but leaves significant wiggle room re: nature and scope of cap. £100 figure doesn’t feature.

A new addition to the Tory party manifesto is the pledge to tackle concerns over rising energy bills by putting in place a safeguard tariff cap for an unspecified number of consumers who are on the poorest value tariffs. The cap will also include bills paid by micro businesses.

“The manifesto wording was vague, as expected, but hints that the impact for the industry may be much less than we feared,” said Deepa Venkateswaran, an analyst at Alliance Bernstein.

Mrs May had promised a hardline, market-wide cap on all standard household energy tariffs but the party line appears to have softened the stance following fierce criticism that the move would stifle competition. The party has promised to maintain the competitive element of the retail energy market by supporting initiatives to make the switching process easier and more reliable.

Theresa May 
Conservative party leader Theresa May

“Alongside giving individuals greater control over their energy bills and protecting customers from unfair bills, we will help them to save energy,” the party added. Its energy efficiency drive would include a commitment to upgrading all fuel poor homes by 2030 and revising requirements for new homes too.

“An energy efficient home is a more affordable and healthy home,” the party said.

It came as a relief to the beleaguered energy industry which has lost hundreds of millions of pounds in market value since the price cap plans emerged. SSE shares rose 2.3pc to around £15 and Centrica climbed 4pc to £2.

Ms Venkateswaran said the manifesto suggests that the cap is not intended to save money on current bills but to prevent future unfair price hikes. On this basis the starting point for the Government cap would be the highest standard tariff in the market, rather than the average, and would sit just above current ‘reasonable prices’.

A Conservative spokesman said: “There has been absolutely no watering down of our plans to cap energy prices and to suggest otherwise is simply wrong.”

Meanwhile the long-held Tory support for shale gas is set to continue. The party dusted off plans first put forward by former Chancellor George Osborne in 2014 for a sovereign wealth fund. Under the latest plan it will pay shale revenue directly to individuals as well as for the benefit of the country at large.


Reality Check: Why does Labour want to control National Grid?

The leaked version of the Labour Party manifesto commits to “take energy back into public ownership to deliver renewable energy, affordability for consumers, and democratic control”.

Part of that would involve “central government control of the natural monopolies of the transmission and distribution grids”.

Natural monopolies are businesses where there are no benefits to be had from competition.

They are usually areas where there is a lot of initial spending on infrastructure needed, such as train tracks or water pipes.

It does not mean there can only be one business serving the whole country, but it makes no sense to have companies competing to provide such services to consumers in a particular area.

It would be inefficient, for example, to have two taps in your sink offering water from different providers or two sockets in your wall with electricity from competing energy companies.

Being a natural monopoly gives businesses enormous market power, which means that they must be regulated.

Whether it is better to have such services provided by government or by private companies regulated by government is a matter of political opinion.

National Grid’s main business is moving electricity and gas round the country. This is known as transmission. The very last leg of the journey into people’s homes and businesses – known as distribution – is done by a number of different companies. National Grid does own a stake in Cadent Gas, a distribution firm, but most gas distribution and all electricity distribution is controlled by other firms.

The cost of transporting gas and electricity round the country accounts for 29% of the average dual-fuel (both gas and electricity) bill, according to Energy UK, up from 23% in 2010. But National Grid says its share of that – the transmission cost – is only 5% of the typical electricity bill, and 3% of a gas bill. The rest is distribution costs.

Owning the transmission and distribution network would give the government considerably more control as it attempted to deliver promises in the leaked manifesto to deliver renewable energy and affordability for consumers, including keeping the average dual fuel bill below £1,000 a year.

The leaked manifesto also pledges to ban fracking (the use of high pressure liquids to extract gas from rocks) and use carbon capture (stopping carbon dioxide from escaping with other waste gases) as it moves to cleaner fuels.

Control over the network might help with this, but the government via its regulator and planning decisions already has a big say over the future energy mix.

Just nationalising National Grid (which is worth about £38bn on the stock market at the moment) would not achieve what Labour is promising – it would give the government the company that owns the UK’s electricity and gas transmission (it might also leave the government owning National Grid’s energy business in the US).

The distribution part of the equation is a slew of other companies – for gas alone it would be SGN, Northern Gas Networks, Wales and West Utilities, as well as Cadent Gas.

But the leaked manifesto calls for control of these companies, which could possibly be achieved by buying stakes in these businesses rather than nationalising them.

BBC business editor Simon Jack says National Grid’s UK business is estimated to be worth about £25bn.

“A chunky purchase but one that could quite easily financed in that it makes enough money to repay the interest on any money borrowed to buy it.”

National Grid has a lot of shareholders.

It’s been listed on the London Stock Exchange since 1995.

Its shareholders, including 880,000 small shareholders, would be very upset if they didn’t get a good price from the government for their shares.

There are not many precedents for nationalisation of profitable companies in the UK – companies are usually nationalised when they are in financial difficulties – so it is not clear at this stage what the process would be.


Energy price rises help drive UK inflation up to 2.7%

The rising cost of electricity contributed to inflation’s rise to 2.7% in April, its highest level in three and a half years.

Increases in the cost of clothing, car tax and air fares were also blamed by the Office for National Statistics for the rise in consumer price inflation (CPI) that exceeded City forecasts of 2.6%, and soared above the previous month’s figure of 2.3%.

With wages increasing by just 1.9%, the new inflation figure highlights the growing pressure on living standards and consumer spending.

The Bank of England predicted last week that inflation would peak at 2.7% in the summer. However, the ONS said producer output price inflation was above 3%, indicating that further rises in inflation could be expected.

Alan Clarke, an economist at Scotia Bank, said he expected further electricity and gas price rises and that an acceleration in food price rises would push CPI inflation to 3.25% in the autumn.

“We remain convinced that the market is underestimating the further upside for inflation from here,” he said.

Clarke argued that the retail prices index (RPI), which includes some housing costs, was already at 3.5% and would rise to 4.25% before the end of the year, putting extreme pressure on consumers to cut back spending on non-essential items.

The National Institute for Economic & Social Research (NIESR) forecast last week that British workers will see their disposable incomes shrinking this year as a result of rising inflation that will peak at 3.4%, while average wage rises are capped at only 2.7%.

Howard Archer, chief UK economist at IHS Global Insight, said rising inflation would put a further squeeze on real incomes and force Threadneedle Street to delay any move to raise interest rates.

“The Bank of England will most likely sit tight on interest rates through 2017 and 2018 – and very possibly well beyond.

“We suspect it will end up remaining tolerant on the inflation overshoot given likely limited UK growth and the prolonged, highly uncertain outlook that the UK economy will face as the government negotiates the exit from the EU,” he said.

The TUC general secretary, Frances O’Grady, said the government needed to protect workers from a slump in real wages.

“Working people are still £20 a week worse off, on average, than they were before the crash. That’s why living standards must be a key battleground at this election,” she said.

“All the parties need to explain how they’ll create better-paid jobs, especially in the parts of the UK that need them most.”

But Scott Bowman, UK economist at Capital Economics, was more optimistic that inflation would be held in check. He said many of the elements pushing up inflation were one-off factors and their effect would wane over the coming months.

“The sharp rise was mainly due to factors that, while they won’t be reversed, shouldn’t be repeated. Indeed, a large part of the rise in inflation reflected air fares reversing the previous month’s fall as a result of Easter shifting from March last year to April this year.

“What’s more, vehicle excise duty rates rose this April and tobacco and alcohol duty increased by more this year than they did last year,” he said.


EDF to buy majority stake in onshore wind developer

EDF’s renewable arm has confirmed plans to buy a majority stake in an onshore wind power developer.

EDF Energies Nouvelles said it has reached a full and final agreement with the shareholders of FUTUREN to buy a 67.2% interest in the company.

FUTUREN has operations in France, Germany, Italy and Morocco and currently operates around 745MW of assets in those countries.

Antoine Cahuzac, EDF Group’s Senior Executive Vice President for Renewable Energy said: “The coherence between EDF Energies Nouvelles’ and FUTUREN’s activities will help to strengthen EDF Group’s major strategic goals in renewable energy.”

The deal remains subject to the approval of the German competition authority.


ScottishPower chief Keith Anderson hits out at UK Government gas and electricity bill price cap plans

ScottishPower chief Keith Anderson has rounded on UK Government plans for a price cap on gas and electricity bills claiming it could harm competition.

Anderson said the Government should instead make the “bold move” to scrap standard variable tariffs (SVTs) and only use price caps as punishment for firms that fail to move customers on to better value fixed deals.

ScottishPower hiked its SVT raised last month, with electricity prices rising by 10.8 per cent and gas by 4.7 per cent.

Work and Pensions Secretary Damian Green confirmed last weekend the Government will cap energy prices if it wins the General Election in June.

Iain Conn, who heads British Gas parent Centrica, warned on Tuesday a price cap could turn his group into a loss-making business.

Anderson notes in ScottishPower’s first quarter update: “A potential price cap could harm competition, so the bold move by Government would be to set a deadline to abolish SVTs and get every customer on a fixed-price deal instead.”

He added: “The Government could impose a target that two out of three customers should be on a deal by the end of 2018, and all customers on a deal by the end of 2019 with SVT abolished once and for all.

“Any company that fails to meet these targets should have a price cap not only imposed but retained until all their customers are on deals.”

Anderson said customers need to ensure they switch providers regularly to get the best tariffs.

“Just as you insure your car every year and go to the market for the best deal for you, so every energy customer should engage with the market at least once a year to make sure they are on the best deal for them,” he said.

ScottishPower’s first quarter results show its retail supply business saw profits fall by £81m, which it blamed on higher costs and mild weather conditions at the start of the year.

The drop in retail supply earnings helped push total underlying earnings across UK generatio nand supply down 73 per cent to £47m.

ScottishPower said it managed to stem customer churn in Q1, with gas and electricity accounts edging up to 5.5 million from 5.4 million a year earlier as it focused on offering attractive fixed rate deals.

Spanish parent Iberdrola saw group net profits fall 4.7 per cent to €827.6m (£704.8m) in the first quarter.


UK’s cheapest energy supplier closes doors to new customers

The independent energy company behind the retail market’s cheapest deal has shut its doors to new consumers amid concern over its mounting complaints and wafer thin cash reserves.

Iresa Energy is one of almost fifty challenger brands to the big six legacy suppliers but it has set itself apart by offering a rock bottom dual fuel supply tariff at an average price of £834 a year.

However, the company has slammed the brakes on its rising popularity after the regulator warned the company to get a handle on an increasing number of complaints from its customers.

“We told Iresa they needed to resolve this problem and have asked them to explain to us how they will ensure that it is easy for their customers to contact them and provide them with a level of customer service they are entitled to,” he said.

Iresa was not available to comment on its customer service or its decision to close the supplier to new customers.

The company’s meagre cash balance has also raised concern that Iresa may be the next casualty of rising energy company costs after the collapse of GB Energy due to the steady rise of wholesale market prices and other costs.

Iresa held just over £12,300 in cash and debt of almost £90,000 at the end of 2015 according to its most recent publicly available financial results which were posted to Companies House in September.

Ofgem has raised hackles among established energy companies by stopping short of setting minimum collateral requirements for new suppliers.

Instead it oversees a scheme which bails out the customers of failed energy companies using a safety net paid for by other suppliers, many of whom may have lost customers to under-funded suppliers offering unsustainably cheap deals.


A Consensus Busting Election on Energy Policy?

Contradicting months of definitive denials about the prospect of a general election, Prime Minister Theresa May announced a snap election this morning, set to take place on 8 June. Purdah could commence on the 4th May five weeks ahead of election day.

It is widely expected that the election will be dominated by Brexit. That’s no great surprise. But the presence of so dominant a single issue, and in the context of an opposition in obvious difficulties, the real question is what latitude this gives to the Conservative Party to push the envelope on other policy areas? These factors leave plenty of less illuminated space in their manifesto, to pursue what would otherwise be considered difficult or controversial policies. The temptation is obvious if these positions are likely to poorly scrutinised or challenged by opposition parties with eyes on internecine warfare (Labour) or on Brexit (Liberal Democrats). One area of obvious attraction to certain parts of the Conservative Party will be to continue to erode levels of commitment to dealing with climate change, and to decarbonisation.

The Conservative journey down this road has already begun, and continues a pathway set out in the last election manifesto in 2015.The Cameron era manifesto centred on “affordable, reliable energy” being “critical to our economy, to our national security, and to family.” Specific pledges included banning any new onshore wind and promoting competition through implementing the recommendations of the Competition and Markets Authority investigation.

We have already seen the abandonment of Carbon Capture and Storage competition, the erosion of financial support for renewables and the sudden change to Levy Exemption Certificates. In the last few weeks we have heard rumours that the government are effectively set to abandon their pursuit of the EU 2020 targets, and very powerful conservative voices put their names to the recent House of Lords report on energy policy that urged the journey towards prioritisation of cost and security of supply to accelerate. Furthermore, statements from BEIS and the Prime Minister about Big Six price rises being “unacceptable” may signal a manifesto commitment of action on energy prices and reinforce the weighting given to affordability ahead of carbon reduction.  The political spotlight generally has recently fallen on domestic energy prices in recent weeks and months though, and give the recent Parliamentary debate on the issue that garnered cross party support for intervention, we would expect all party manifestos to include a pledge to rein perceptions of unfair price differentials with some form of price freeze or cap

The only novel policy ideas recently have centred on the increasing prominence of the Industrial Strategy and government support and focus on key areas of the economy.

Generally, it is clear that the trilema has already been very nearly toppled off its perch in this Parliament by a dualema in form if not in legislative substance, where security of supply and cost of policy take pre-eminence over decarbonisation.

Whether the voices proposing further movements in this direction within the current government win out or not in explicit policy commitments in the conservative election manifesto this time is not a given. The Conservative Party is a broad church and there are plenty of climate change activists in its ranks. However, there is a clear ideological thread that appears to link Brexiteer factions and climate change scepticism. In the current balance of party power that prevails that may tip the balance towards an agenda that really shakes up the cross party, low carbon energy policy consensus. This is a consensus that has existed at least since the turn of the millennium, and is emblematically embodied in the Climate Change Act 2008.

Arguably, with this election we are as close as we have ever been to a reversal in policy that could threaten the 2008 Act. It doesn’t mean that there will a manifesto commitment to its repeal but even considering the risk of it happening is is a profound state of affairs and signals just how far the energy policy landscape has changed, and how quickly.

Whether we see this radical shift remains to be seen. In any event  an immediate and real impact of the election is the uncertainty and delay this will bring to much needed policies. So, at the very least it will put back much needed changes and refinements to policy, even if the current shaky accommodation of the trilemma is maintained.

Unless we see a slew of rapid policy announcements, then Purdah will mean the effective shutting down of BEIS and Ofgem as only day to day operations are maintained. What were expected to be imminent key decisions and policies now become immediately uncertain, in substance and timing. These include:

The expected green paper on effective competition in the domestic energy retail market
The timing of the next Contracts for Difference (CfD) auction
A raft of comprehensive reforms to embedded benefits (CUSC modifications CMP264/265, a Targeted Charging Review, and potential a Significant Code Review
The Smart Energy call for evidence and the anticipated follow up consultations on a wide range of related areas
The promised new accounting controls for low-carbon scheduled for November, but can this timetable now be met?
Similarly, a decision on the Carbon Price Support for the period post 2021 was due “later this year” but again now this seems challenging, particularly given the complex inter-dependency with whether we continue to participate in the EU ETS scheme
2025 coal closure policy
The Emissions Reduction Plan that the BEIS press office even this morning maintained would be released “shortly”
The UK was already on the cusp of an energy infrastructure investment hiatus because of Brexit, the possibility of a further Scottish Independence referendum, as well as the poor management of policy changes in areas such as embedded benefit reform. The election announcement merely adds to this unhelpful cocktail , adding considerably to the many unanswered questions hanging over UK energy policy. It may even be a direct contributor to further uncertain political inflexion points. For example, if the SNP takes 55+ seats, again then the calls for a second Scottish independence referendum will only become more deafening.

So, at the very least the election on June 8 will herald challenges in making timely decisions on the critical policies we adopt in pursuit of the destination of a low carbon future. However, we believe, more fundamentally, it may also change that destination altogether.


BILL HIKE EDF Energy to hike gas and electricity bills by 7.2% from June – adding £78 a year

It’s the second price rise in less than six months and it will add an average of £78 a year to bills for 1.5million customers