Power 2020: kick-starting Britain’s energy revolution – Policy Forum 1

Power 2020 – Labour’s Energy Policy

Ed Miliband’s energy policy announced at this year’s Party Conference was great political rhetoric, but it needs more work if it’s going to be workable under a future Labour Government. That was the main conclusion of an energy policy roundtable hosted by Connect Communications this week to launch our Power 2020 series of events, which kick off on 30 January 2014.

Our event brought together a mix of Labour Parliamentarians, trade unionists, and senior figures from the energy sector including oil and gas producers, representatives from the renewable sector, investors and those involved in retail supply. The diverse variety of attendees led to a wide range of views in the room, but during the discussion a number of common themes emerged.

An overriding conclusion was that the UK faces an energy supply crunch and billions of pounds of investment will be needed if we are to “keep the lights on” whilst at the same time continuing to reduce carbon emissions. The Labour Party have made it clear that there wouldn’t be public money to deliver investment and customers are already struggling with funding the investment through higher bills. The money will have to come from investors who want to see a long term return on their capital.

Both the Government and the Labour Party are risking this investment by making the sector a political football. Concern about the Government’s indications that they want to step away from the current regime of green subsidies was seen as creating almost as much investor concern as the Labour Party’s pledge to freeze prices. Labour’s promise of further regulatory changes, on top of the current reforms through the Electricity Market Reform process, is a barrier to companies wanting to invest in the UK market.

More regulatory intervention to weaken the hold of the Big Six energy companies is at the heart of the Labour Party’s approach. Whilst opposition from the industry is to be expected, Ed Miliband’s plans risk being opposed from within the Labour movement as trade unions believe a breakup of the Big Six would lead to job losses and worsening employment conditions for those remaining in the industry.

Whilst the trade unions believe that lower energy prices are important in order to help job growth in other industrial sectors as well as helping their members with their own energy bills, attacking the Big Six isn’t always an effective way of securing lower prices given the important role they are playing in delivering investment to the sector. There seemed to be a lack of consensus about what the answer to lowering prices should be – whether it be a move to new energy sources such as shale, or more investment in the renewables sector?

There is a difference between the price of energy and the cost of energy to the consumer. It emerged that many see investment in energy efficiency as the most cost effective way to reduce carbon emissions as well as deal with the growing problem of fuel poverty. The Government’s policy of seeking to reduce the cost of housing by reducing the energy efficiency requirements in building regulations was seen to be a retrograde step in the battle against long term fuel poverty.

Addressing the problem of cold homes through reform to improve schemes to deliver more efficient boilers and home insulation was highlighted as a credible way for the Labour Party to deliver on its objectives of social justice whilst boosting progress towards meeting the target which Ed Miliband announced in his speech of decarbonising the power sector by 2030. As well as home insulation, the role of mircopower and community generation could give people more ownership over energy by producing it as well as consuming it. This is a reform which fits well with Ed Miliband’s “One Nation” vision.

However, there was disagreement as to whether the main driver of energy policy should be decarbonisation or energy security. Many suggested that despite continuing public concern about climate change, energy security was the most important issue politically.

Labour haven’t formed a coherent view on the role of shale gas in delivering energy security. There appears to be significant differences of opinion within the Labour movement on shale – between those who see the potential of shale to boost energy security, deliver new jobs and raise tax revenues; and those who believe that the strength of public opposition and the potential of green technologies mean that shale gas is a technology that the Labour Party should not be supporting.

The shale industry needs to engage more with the Labour Party and the wider Labour movement if they want to ensure that the same support that the Coalition is providing to the industry will continue under a future Labour Government. Many sector insiders contrast the Labour Leader’s approach to the energy sector with the approach suggested by Sir John Armitt’s infrastructure review which called for longterm thinking and political consensus in the delivery of infrastructure.

It is clear that the energy sector and those employed in it are very concerned about the direction of Labour’s policy making and there are real worries that the politicisation of the industry is undermining investor confidence at a time when investment is desperately needed.

Our Power 2020 policy series starting on 30 January 2014 will provide an opportunity to explore these policy themes further and endeavour to join up thinking and new ideas.