UK Energy Policy: A Little Less Intervention, a Little More Action

Nick White, Managing Partner, Arthur D Little

The UK is facing major energy challenges. Aging infrastructure, greater reliance on gas imports and tighter controls onemissions, mean that the landscape is changing. Investment is required on a huge scale in order to maintain security ofsupply and affordability to consumers, while at the same time reacting to environmental goals.The complexity of many measures proposed under the EnergyBill seems likely to deter some investors, or at the least causedelays while they seek to understand the possible implications and risks involved. Experienced market players, on the otherhand, will be more comfortable with this complexity. Timely implementation and operation will be difficult and costly. Above all, the years of uncertainty, and continuing lack of clarity on many EMR measures, have left the UK with a problem:without clarity and consistency investors cannot commit. Too much intervention itself causes uncertainty, leading investors andmarket players to defer investment decisions. The economic downturn, and corresponding drop in energy demand, has delayed crisis point by a few years, but it is fast approaching. We have cast a critical eye over the policy measures, which have been under development for several years and are currently making their way through parliament. We suggest that rather than complex interventionist policy, the market needs a clear long-term framework within which it can work to solve the problems we are facing and attract external investment. We cannot afford to keep our options open any longer. It is timefor a little less intervention and a little more action.