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Mon, 26 October 2020

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Energy expert urges the Chancellor to bring certainty to the sector ahead of Budget 2016

Energy expert urges the Chancellor to bring certainty to the sector ahead of Budget 2016

Tom Greatrex, Chief Executive of the Nuclear Industry Association | Nuclear Industry Association

6 min read Partner content

With the cost, security and environmental impact of energy production high on the political agenda, it has never been more necessary for long-term thinking to create stability in the industry. 

In the UK, striking the balance between serving consumers and meeting a range of ambitious environmental targets is an ongoing challenge for policy-makers.

This is also impacted by the potential conflict of the necessity of a long-term plan with the short-term horizon of the policy-makers who must design and implement it.

Tom Greatrex chief executive of the Nuclear Industry Association understands the issue all too well having served as shadow energy minister under Ed Miliband.

This is why, in the run up to the Budget, he is urging the Chancellor to reassure the industry of its future.

He says: “I think like every other aspect of the energy sector, what’s important is to have stability and clarity of energy policy because we need to ensure there is investment in new replacement generation capacity and low carbon generation capacity, of which new nuclear is an aspect.  

“What investors look for is clarity and predictability of policy and it is something which has been undermined by decisions in a range of areas. It’s going to cost many billions of pounds to update our generation capacity and ensure we have a fit for purpose energy system, so this clarity is important.”

For Greatrex it is not just about language, but about turning promises into firm commitments. 

He continues: “What we want to see from the Chancellor is not just statements underlining the importance of that, but Government policy which follows it through as well.

“It’s important the Chancellor expresses his understanding of the challenges around energy security and carbon emissions. There have been times in the past when he hasn’t been as committed as others would have liked him to be.”

More specifically, Greatrex highlights the importance of infrastructure guarantees for new developments, a commitment on the size of the Levy Control Framework - the treasury instrument which controls how much money goes into low carbon generation - beyond 2020, and clarity over the future of the capacity market and the carbon price floor.

He explains: “Those have a significant influence on the risk profile attached to investments, there have been changes made to those policies in the past which have caught people unawares.

“That is something which industry generally and those that invest in infrastructure need to have a sense of direction on, so they are able to make their investment decisions based on knowledge and a stable policy.”          

He goes on to stress the importance of long-term thinking when it comes to energy infrastructure, saying it is “absolutely vital.”

“Nuclear power stations will last 50 or 60 years – they will outlast any Chancellor, Prime Minister or in all likelihood Government. So long-term decision making and a long-term framework for policy is vitally important for those types of investment.

“But it is also true of other types of infrastructure investment as well, so in some ways it’s not just about nuclear, but infrastructure more widely.”

Failure to think long-term, he continues, can stifle innovation and compromise achieving significant policy goals. 

He says: “We have got binding targets at a UK level and the Paris agreements from last year will lead to global targets. We have stuttered along a bit because of policy changes to energy over the past few years.

“The Government has an opportunity early in this Parliament to look ahead to the next two or three parliaments to set a consistent path for the future. That is what people want to see.

“We had that to a certain extent in Amber Rudd’s speech in the latter part of last year, which set policy priorities but what is important within the policy is the financial arrangements and framework. That is largely driven by the Treasury and is within the gift of the Chancellor.

“If we really want to get that investment in place, what is needed is a clear policy framework and clarity about related taxation and policy instruments.”

This investment is not only vital for the future of the UK energy sector, but for many other British businesses which supply it.

However, this is an opportunity which some firms are not yet taking advantage of, and this is something Greatrex feels the Government could take action on.

He says: “There are some companies in the supply chain that might not be in the right place to benefit from those opportunities, but with help, guidance and investment they could very well be. And it could help to ensure the value of the investment is also helped through the supply chain in different parts of the United Kingdom.

“The Fit For Nuclear programme, which was funded previously under the Coalition, is very valuable in enabling potential supply chain companies to understand what it is they need to do to win contracts as well as understand the technical and regulatory requirements they need to meet.

“It is something we want to continue so as new nuclear projects move towards construction they are able to award a degree of work to UK based companies, because then there is a wider economic benefit which is good for UK plc.

“It is something you will hear the Chancellor and the Business Secretary and their predecessors talk about, and now there is an opportunity to make it happen through the new nuclear programme – it’s important government policy and industry effort is joined up to ensure it is achieved.”

Turning to his own role – Greatrex has only been in post for a month – he sets out his long-term objectives.

He says: “My wider ambitions are three-fold. The first is to ensure that we have a strong and capable and active supply chain which is able to realise the available opportunities.

“Secondly, as new nuclear develops around the world, that UK expertise is able to be exported, so there is an added economic value.

“The third is to see a wider appreciation of the energy requirements we have as a country and to get away from the circular debate about different technologies. I want to see an understanding that we need to make the most of all the technologies available – new nuclear, renewables, energy storage, demand management.

“We are going to need all of those tools to meet our objectives, and that is what I hope to bring to the debate.”  

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