AUTUMN STATEMENT 2013
ENERGY EDITION
The Headlines ESTIMATED SAVING ON DOMESTIC ENERGY BILLS
£50
per year
LOW CARBON TECHNOLOGIES WITH REVISED STRIKE PRICES
6
UP
DOWN
5
58%
Jessica Lennard Jessica Lennard Director of Energy Public Affairs
Analysis Analysis
Director of Energy Public Affairs
Energy policy has rarely experienced such high levels of instability as in recent months, and today’s Autumn Statement will have done little to reassure many in the sector that all is well. Ed Miliband’s energy price freeze announcement set the horses running in Government, shifting political debate from the economy to the cost of living. Calls from right wing Conservatives to cut ‘green levies’ were answered today as the Chancellor confirmed a range of measures which Government expects will enable energy companies to lower bills by up to £50. Ironically, the focus has been on energy efficiency, which the Government acknowledges is the most effective way to bring bills down permanently. The ECO home insulation deadline has been extended by two years and the emissions reduction requirement reduced by 30%. The previously regressive Warm Home Discount will now be funded through taxation. Transmission firms have been asked to reduce cost increases by 20% and the Government will provide extra cash for home insulation through a tax avoidance crack down. Announced early in an attempt to stop the rot of Labour’s price freeze pledge, the measures have met some criticism. Labour claims the energy companies have been let off ‘scot free’, whilst consumer groups expressed dismay that the cuts fell on ECO - ‘the only levy that actually helps consumers’. Unions and the insulation industry warned the cuts could cost thousands of jobs. The outcome appears to be a victory for energy companies: while profits remain untouched, the Government has shown itself willing to cut levies if it means avoiding further prices rises before the General Election. Autumn Statement 2013
VALUE OF ENERGY PROJECTS AS A PROPORTION OF TOTAL INVESTMENT OUTLINED IN NATIONAL INFRASTRUCTURE PLAN PIPELINE
A significant onshore oil and gas tax break announced in July 2013 was also confirmed, as well as a fuel duty freeze which will please drivers. But it was a disappointing day for energy intensive industries, whose hopes of a freeze on the carbon price floor while the 2012 support package remains stuck in Brussels, in the State Aid process. Analysts are no doubt busy crunching the numbers to discover the real impact of yesterday’s subsidy hike for a number of renewable technologies, including offshore wind. But the Chancellor’s message today was clear: the Government remains committed to shale gas, nuclear, and offshore wind; while onshore wind will be scaled back as much as possible. Reading between the lines, when combined with the ECO cuts, this looks like pragmatic rather than strategic decision-making by the Chancellor. The priority appears to be short-term politically expedient savings, even where the result will be greater expenditure after the Election. Whilst yesterday’s infrastructure announcements also appear positive - with energy projects making up the majority of the pipeline - it is worth noting that no immediate extra cash has flowed from InfrastructureUK. Meanwhile, the FID process is a slow-moving policy area, and may provide scant reassurance to uncertain potential investors this winter. Whilst the Government narrative remains positive for all but onshore wind - nuclear and shale gas developers can clearly feel optimistic - it remains to be seen how much longer some pipeline projects can feasibly be supported by warm words rather than real progress.
Edelman | Southside | 105 Victoria Street | SW1E 6QT London | www.edelman.co.uk | 0203 047 2456 | @EdelmanUK
REACTION ROUNDUP
Key Comments Ed Balls MP Shadow Chancellor “Does he really think he can get away with tinkering around the edges? Moving the green levies that his own party introduced off the bills and onto the taxpayer and - surprise, surprise - letting the energy companies completely off the hook”
Ken Cronin Chief Executive, UK Onshore Operators Group “the country needs the correct framework for operators, and that includes a clear signal that an appropriate and fair tax regime is in place that will incentivise the long term nature of investments. The Chancellor’s initiatives should be welcomed as they give that strong signal.”
Andy Atkins Executive Director, Friends of the Earth "Yet again the long-term health of our economy has been completely undermined by the Chancellor’s short-sighted determination to keep the nation hooked on dirty and increasing costly fossil fuels.”
Terry Scuoler Chief Executive, EEF: Manufacturers’ Organisation “While the Autumn Statement contained some useful measures on apprenticeships, skills and business rates… it failed to address the growing threat to investment from energy prices that are squeezing margins and racing ahead of our competitors.”
Guy Newey Head of Environment & Energy, Policy Exchange “Favouring offshore wind over cheaper low carbon techs means less decarbonisation (for the budget available)”
Twitter Energy Conversation McAleenan OverviewBenedict Account Manager
NUMBER OF AUTUMN STATEMENT TWEETS ABOUT ENERGY:
1,951
Jessica Lennard Director of Energy Public Affairs 020 3047 2204
Autumn Statement 2013
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Edelman | Southside | 105 Victoria Street | SW1E 6QT London | www.edelman.co.uk | 0203 047 2456 | @EdelmanUK