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Centrica Boss Attacks UK Energy Policy “Paradox”

Outgoing Centrica Chief Executive Sam Laidlaw has taken a back seat of late following his controversial comments with regards Centrica Energy logothe Competition and Markets Authority investigation but is now back in focus after hitting out in an altogether more coherent attack on the “paradox” of UK energy policy.

The focus of Laidlaw’s ire was three-fold:

  • The government’s on-going support for expensive offshore wind and other low-carbon technologies pushing the marginal cost of energy upwards
  • Whilst allowing energy companies to propose coal-fired power stations for the receipt of a subsidy scheme, increases costs and spending on fossil fuels at a time of trying to cut carbon emissions.
  • Against a back drop of falling wholesale market prices

Laidlaw opined:

“By the end of this decade, under current plans, we’ll be spending £7.6bn a year through the levy control [subsidy] framework, much of it to support wind turbines that have not come down in cost.

“Energy consumers will be puzzled to learn that they are unlikely to enjoy the benefit of those lower power prices. That’s because of the choices made by successive UK governments about which renewable and low-carbon technologies to prioritise and how to incentivise them.”

Laidlaw pointed to the downward revision by DECC of it’s forecast of electricity prices through to the end of the decade by up to 20% and the predicted £140/MWh required to subsidise offshore wind.

Referring to the Capacity Mechanism auction scheduled for December that is designed to contract back-up generation to cover the intermittent nature of renewable generation, Laidlaw said:

“The expectation was that this would incentivise the building of new gas-fired power stations. But look through the pre-qualification lists published a few weeks ago and it is clear that old, dirty coal stations will be paid extra to stay online for longer.

“The cost of this will be levied on customers’ bills, alongside the cost of the carbon price floor, which is designed to encourage switching away from coal. There’s an inherent paradox here.”

DECC countered:

“There is no paradox. The carbon price floor and the capacity market [subsidy scheme] work together to ensure we move to low-carbon generation in a way that keeps the lights on at peak demand at lowest cost to the consumer.

“The carbon price floor [CPF] is designed to provide greater support and certainty to the price of carbon in the UK’s electricity generation market. Effective carbon pricing, including the CPF, remains an important part of the government’s energy policy. Establishing a minimum carbon price sends a credible signal to help drive billions of pounds of investment in low-carbon technology.”

Peter Atherton, energy analyst at investment bank Liberum Capital, echoed Laidlaw’s thoughts saying:

“We have one set of market interventions trying to kill coal, but then we worry about the lights going out so we have another intervention trying to keep coal going. [It’s] difficult to make this stuff up.”

Lawrence Carter, energy campaigner at Greenpeace, said:

“The most influential energy boss in the country is now confirming what Greenpeace and others have been warning all along. A big chunk of these new energy hand-outs will be pocketed by coal plant operators and used to extend the lifespan of some of Europe’s most polluting power stations.

“Even some of the biggest players in the energy industry think this new policy doesn’t make sense. Ed Davey needs to listen to these concerns and make sure dirty coal plants don’t get a penny of public money.”