Drax decision is another blow to failing energy policy

Drax pulling out of their Whiterose clean coal technology project is another sign that the UK government's energy policy, or lack of one, is crashing around their ears.

Drax operations director Pete Emery said: “The decision is based purely on a drastically different financial and regulatory environment and we must put the interests of the business and our shareholders first.”

Analysts said the decision to opt out of the project is “not a great surprise” given the regulatory uncertainty faced by companies reliant on green subsidies. Citigroup analysts said: “It doesn't come as a surprise that the company seems to be losing faith in the government's commitment to renewable targets.”

Former SSE CEO Ian Marchant added to the critics of government policy at a British Institute of Energy Economics event saying it is “institutionally incapable” of delivering policy which can support the UK’s security of energy supply. He said: “The question is: do we have an energy policy? And the answer is no. We’re defining policy by the word ‘no’. I haven’t heard any vision of what ‘yes’ might look like.”

Marchant’s criticism echoes others and follows months of government intervention in renewable energy support through cuts planned for both large and small scale renewables projects.

Scottish Renewables have also said that the early end to the Renewables Obligation puts 2GW of projects at risk: “These are projects that could bring around £3bn of investment and provide enough generation to meet the equivalent electricity demand of 1.2 million Scottish homes.”

Former Liberal energy minister Ed Davey has also questioned government claims that the levy control framework (LCF) has been overspent, branding the claims “misleading”. Davey said the Treasury department viewed the Department of Energy and Climate Change as a group of “provincial hippies who don’t know anything. We were able to win arguments using evidence – but the difference now is that he doesn’t need to debate his decisions.”

The Drax decision on the face of it might be seen as less competition for the Shell led Peterhead CCT project. However, successive governments have messed about with CCT for more than eight years, so the prospects for completion are not good. The factors influencing Drax, might also influence Shell and SSE, even if the UK government gets its act together.

Investor concerns also highlights another weakness in government energy policy – the reliance on the market. The security of our energy supply is too important to be left to market sentiment.

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