Post-Election decision making delay is inevitable - but will the lights stay on?
The winter of 2015/16 will see the UK's electricity generating margin plummet. It could provide a key moment for a new administration's energy policy, says Antony Oliver.
Our politicians are now accelerating through the Easter break towards a month of full-on canvassing to win crucial votes in this too-close-to-call election.
The name of the Prime Minister may well be a two horse race. But there are, barring any unforeseen campaign disasters, likely to be a hat full of potential King-makers and coalition partners vying for a seat at the Cabinet table as the dust settles.
We can expect to see post-Election political horse trading like never before. And don’t expect any rose garden love-in moments this time around.
"It is clear that it will not take much to go wrong next winter for an incoming government to run headlong into its first major ministerial head-rolling crisis."
All of which means that for the infrastructure sector there is a high chance that long awaited but difficult post Election decisions over issues such as where to build a runway in the South East, how best to devolve fiscal power to the regions, how to thread HS2 through the nation’s green land or whether, in fact, to build HS3 first, could well meet hiatus.
Or indeed, decisions over how to prevent the lights going off in the winter of 2015/16.
All were discussed last week at KPMG’s very interesting pre-Election industry briefing and, while the consensus was clear that, regardless of the Election outcome, investment in infrastructure would continue for the sake of the economy, there was also concern that political eyes should not move off the investment ball.
However, while it is certainly possible for an incoming administration to grab and push forward with most of the difficult issues on the table, when it comes to keeping the lights on it may not be quite so simple.
As pointed out by the KPMG briefing, the next winter is now the critical moment for the UK as a large number of UK power stations are set to come off line during 2015.
"For while some infrastructure investment can more easily bear political delay than others, powering the nation is very definitely not one of them. Whoever eventually makes it into No.10 would be wise to take note."
According to Ofgem figures, pessimistic scenarios could see the generating capacity margin fall to below 2% - a figure that most in the know would consider to be the wrong side of comfortable in the winter.
Certainly we have seen great advances made in energy efficiency of late to reduce demand. Add to that National Grid’s recently introduced demand balancing tools to persuade heavy industrial users to switch off at critical times and other measures to pay generators to boost their emergency capacity and we have a system which is more capable than ever of coping.
But it is clear that it will not take much to go wrong next winter for an incoming government to run headlong into its first major ministerial head-rolling crisis.
Of greater concern is the fact that the long term base load new nuclear solution appears to be no closer to becoming a reality. In fact, now that government has launched down the competition-less private sector delivery route for this extraordinarily complex project, there is, in fact, little more that can be done to make it happen - other than paying through the nose to subsidise the already expensive £89.50/MWhr Hinkley Point strike price.
Such is the cost of the last’s Coalition’s “no nuclear subsidy” policy. At this rate it is even possible EdF’s Hinkley Point will not be the UK’s next nuclear power station after all.
Perhaps the next administration will learn from this story of delay and embrace the delivery of complex nationally critical programmes such as power generation with public money.
For while some infrastructure investment can more easily bear political delay than others, powering the nation is very definitely not one of them. Whoever eventually makes it into No.10 would be wise to take note.