UK election 2015: all quiet on the energy front?

17 March 2015 (Last Updated July 15th, 2020 22:59)

The upcoming UK general election promises to be the most unpredictable in decades, but how could it affect Britain's energy future? Labour's energy price freeze has sparked debate, but uncertainty and ambiguity is rife in British energy policy, threatening the country's transition to a low-carbon energy mix.

UK election 2015: all quiet on the energy front?

London night

The UK is bracing itself for a relatively rare political event in May - despite the veritable industry of pundits, pollsters and panellists that springs to life in the months before any major election, the upcoming national vote to decide Britain's next government stubbornly remains too close to call.

The era when British politics boiled down to a contest between the country's age-old Conservative, Labour and now-floundering Liberal Democrat rivals is drawing to a close as dynamic new entrants like the UK Independence Party (UKIP) on the right and the Green Party on the left begin to mount a credible challenge to the political orthodoxy, even if they currently pose little threat on election day. As things now stand, single-party government looks likely to take a back seat to coalitions like the Conservative/Lib Dem alliance that is currently in power. Previously entrenched voters are reconsidering their old allegiances in light of widespread discontent with the established political system.

"The 2015 election is the most unpredictable in living memory," political author Robert Ford told the Guardian at the tail end of 2014. "Past elections have been close but none has featured as many new and uncertain factors with the capacity to exert a decisive impact on the outcome."

Energy policy: low on the election agenda

There are also a wide range of issues galvanising voters in the run-up to 7 May; economic issues continue to dominate political discourse in the UK as the main parties attempt to differentiate their approaches to tackling the budget deficit, while the National Health Service, living standards and the UK's future in the EU are all likely to see electoral skirmishes.

With the all-important UN climate change talks in Paris now looming at the end of the year, 2015 is undoubtedly a banner year for the climate change mitigation debate and the surrounding discussion of clean energy generation. But energy issues have tumbled down the UK's 2015 election agenda in recent years, trumped by more immediate concerns about healthcare and living conditions. Energy policy and environmental issues are almost universally paid lip service, but there's an unspoken understanding that, in this election at least, detailed plans for a clean and efficient energy sector are simply not a vote-winner.



Could vastly increasing grid interconnection be the UK’s ticket to a low carbon future?


As a result, it's more fitting to ask how the election will affect energy, rather than how energy will affect the election. Even in this case there are few clear answers, as campaigning politicians overwhelmingly have their attentions focussed on hot-button issues. The only thing that is certain is that the energy industry is uncertain. From renewable investment to energy market reform, and the fate of UK nuclear, this uncertainty is plaguing the industry and investors in the run-up to the general election.

Electricity bills: energy's only battleground issue

UK energy bills, which have soared in recent years but stabilised in recent months due to plummeting oil and gas prices and wholesale electricity prices hitting a two-year low, are almost certainly the most important energy issue in the upcoming election, primarily because they play a significant part in the broader cost of living debate. The populist appeal of lowering energy bills has been leveraged by the likes of UKIP, which has used it to justify manifesto commitments like repealing the Climate Change Act 2008 and scrapping all renewable subsidies and "green taxes".

Ed Miliband's Labour Party has taken a proactive approach to the question of energy prices by announcing in autumn 2013 that his party, if elected, would freeze energy prices until January 2017, as well as replacing energy market regulator Ofgem with "a tough new energy watchdog" with "the power and remit to force energy companies to cut their prices when there is evidence of overcharging, for example when wholesale costs fall and the market fails to respond".

The policy has resonated with the public, many of whom feel ripped off by the UK's 'Big Six' utilities, which raised prices by around 30% between the last general election in 2010 and Labour's announcement in 2013. According to communications firm Edelman's Trust Barometer 2014, just 32% of the British public found the energy sector trustworthy, a 6% year-on-year drop that placed energy below banking and media as the country's least-trusted industry.

The Conservatives - likely made nervous by the price freeze's appeal to voters but unwilling to take a similar step - have been quick to disparage the policy as an anti-business move driven by ideology, with Prime Minister David Cameron accusing Miliband of running a "petty socialist campaign".

"Energy bills are almost certainly the most important energy issue in the upcoming election."

There are reasonable arguments to make against Labour's price freeze beyond party-political attacks. For a start, the time between the announcement in 2013 and the earliest that a prospective Labour government could implement the policy in May 2015 has left energy companies with the option to raise prices in anticipation of the freeze, which also risks locking in high prices after a freeze takes effect. "If you are going to implement a price freeze, you need to do it on the day you announce it, not give an 18-month window," Liberum Capital senior energy analyst Peter Atherton told the Telegraph in the wake of the policy announcement.

And with utilities potentially expected to lose between £4.5bn and £7bn in revenues as a result of the freeze, there is legitimate concern that these losses would cut into the investment made in renewable energy projects, subsidies of which are also a significant contributor to energy bills. Lower bills mean a more uncertain environment for renewable investors, whether from the UK or abroad. This is the tension at the heart of the matter - are cheap energy bills and speedy renewable development mutually exclusive? If Labour comes to power and implements its prize freeze - and possibly permanent price controls thereafter - the result could reveal the answer.

Fossil fuels, renewables and nuclear: the future energy mix

The UK's future energy mix, meanwhile, rests far enough down the general election agenda that parties can get away with lightly sketching their capacity building plans rather than providing a cast-iron vision. Besides, on possibly the most important issue - the need to replace unabated coal-fired generation with low-carbon alternatives - there is effectively no longer a debate in the UK.

The leaders of the country's three main parties - Cameron, Miliband and Lib Dem leader Nick Clegg - in February signed a cross-party agreement that, alongside supporting a global climate deal and working together to set national carbon budgets, included a commitment to "accelerate the transition to a competitive, energy efficient low-carbon economy and to end the use of unabated coal for power generation". This leaves UKIP as the sole holdout that remains in open support of unabated coal, with the Conservatives refusing to appease UKIP's openly climate-sceptic stance. The agreement might also go some way towards providing a little certainty to clean tech investors, despite the ambiguities of the election.



With scientific concern on the rise, the future of biomass must be built on facts not fantasy.


Still, the lack of key details or even a working timeline for this transition leaves significant room for manoeuvre, and signals from Tory policymakers lend credence to those who question the party's commitment to the low-carbon revolution. Tory support for fast-tracking the use of fracking compares unfavourably with Labour's more cautious (though still pro-fracking) approach to regulation, not to mention the Conservative pledge to cut new onshore wind subsidies and allow local residents to block new onshore wind projects if they win in May.

The Lib Dems, meanwhile, have set out their plans to double the UK's renewable generation by 2020 and make the country carbon-neutral by 2050 with the confidence of a party that knows it has no chance of getting into a position where it would have to make that happen.

The Hinkley Point C nuclear reactor project remains shrouded in uncertainty, with the effects of stalled investments and a European legal challenge from Austria exacerbated by the looming election, which is reportedly bogging down the government's efforts to finalise its deal with developer EDF Energy.

So the uncertainty continues. Mixed messages from the current government - discrepancies like its £315m of support for renewable projects announced in February, together with more than £1bn of global fossil fuel investments - have created an ambiguous environment that has diminished the UK's attractiveness to energy investors of many stripes. The latest edition of Ernst & Young's Renewable Energy Country Attractiveness Index, for example, saw Britain fall to eighth, its lowest ranking in 12 years. If this uncertainty is to be alleviated, whichever party or mix of parties forms the UK's next government will need to take a much clearer position than we've seen so far.

Energy link