Energy leaders demand market certainty from chancellor
06:00 18 March 2013
Archant © 2012
Business chiefs are urging the chancellor to tell energy companies what the government will pay for electricity amid fears that a lack of “certainty” could prevent major investment in Norfolk and Suffolk.
Investment forecast for Norfolk and Suffolk’s energy sector
• Offshore wind: £45bn over 15 years
• Gas production:£20bn over 20 years
• Decommissioning: £4-6bn over 20 years
• Nuclear: £6-10bn over 10 years
• Gas storage: £ 4bn over 10 years
Energy sector leaders want George Osborne to mirror the French and use Wednesday’s budget to give a clear price for energy production, so companies can commit to spending more than £80bn in the region – rather than investing elsewhere.
James Gray, inward investment director for the East of England Energy Group, said the government has spent too long deciding on an electricity price, which would show firms what return they would get on major spending projects.
Meanwhile, John Best, head of sustainable energy at Seething-based marine services firm Fendercare, said market certainty was important for securing the investment that will feed the local supply chain.
Mr Gray said: “It is almost like you have the cavalry sitting on the hill waiting to do great things but they are waiting for a signal from government to say off you go chaps.
“You do not spend any money in difficult fiscal environment without having a clear sign of what the return on your investment will be.
“For the government to say to companies ‘this is what you will pay for the electricity’ will guarantee the benefits that we will acrew as a location in the East of England.”
He added: “If we want an example look to the French. The French government decided it wanted to get into the offshore wind sector.
It invited tenders to develop wind farms off the Normandy coast, made it clear what they would pay for the electricity, and by all accounts, made it clear that they wanted to see manufacturing, construction and development happen in France.”
Mr Best added: “Perhaps the most important message that the chancellor can give out in the budget is any one that underpins certainty.
“This is vital to enable the key long term investments to be made which are critical to keeping the lights on for UK plc, as we move towards a lower carbon economy.
“This journey requires a long term stable approach to all matters which will affect future investment, across the whole balanced mix of energy sources which through the operators, developers and utilities feeds the energy supply chain.”
Meanwhile, Brian Nixon, chief executive of energy trade body Decom North Sea, said the government must also provide certainty for the oil and gas decommissioning sector, which includes Norfolk and Suffolk companies, by providing tax relief through decommissioning relief deeds.
Mr Nixon said: “The decommissioning relief deeds would mean those operators whose fields are already approaching sub-economic levels are likely to move forward with their decommissioning programmes with greater confidence.
“The government is also being tipped to stimulate greater interest and investment in mature fields from independent operators and we would add our voice to others in the industry welcoming such a move.”
He added: “It is important that supply chain companies as well as operators gain clarity and confidence on future market activity and timing of decommissioning projects.
“Contractors and small to medium-sized companies, often the source of innovation and solutions, require greater assurance of operators’ plans and timescales if they are to have the confidence to invest and prepare meaningfully.
“It is therefore to be hoped that operators receive the reassurance they need from the Treasury, but also that this reassurance can then be cascaded throughout the supply chain.
“While Decom North Sea does not promote the acceleration of decommissioning under any circumstances, there is a real need for a steadier flow of decommissioning activity in order to create a viable market.
“Only when the industry has confidence in this market and individual programmes will it respond with the levels of investment and innovation required to drive efficiency and reduce costs.”