On 8 May 2015 David Cameron’s Conservatives won an unexpected majority in the House of Commons, bringing an end to the Conservative-Liberal Democrat Coalition that had been in power since 2010. The Liberal Democrat’s Ed Davey, who served as the pre-election Secretary of State for Energy and Climate Change, lost his seat as a Member of Parliament, creating a vacancy for the post of leader of the UK Government’s Department of Energy and Climate Change (DECC). On 11 May 2015 David Cameron appointed Amber Rudd, a former investment banker and businesswoman, and Member of Parliament for Hastings and Rye, as the new Secretary of State for Energy and Climate Change.
This article provides an overview of what the election result and the new minister for energy and climate change mean for the UK’s energy sector.
In their pre-election manifesto, the Conservatives pledged to continue to support the UK Climate Change Act 2008, which established a framework to develop an economically credible emissions reduction path, and to fight for a global deal on climate change. Unlike many Conservative Members of Parliament who are skeptical of measures to address climate change and anti-renewable energy, the new Secretary of State for Energy and Climate Change has been described as “really green and no nonsense.” She was climate change minister for almost a year before the election and is considered to have a strong grasp of the issues and a clear view on how to tackle them. Her objective is to adhere to the UK’s overarching carbon targets, while focusing on minimizing costs. It is thought that she is likely to push hard for a deal to cut emissions at the December United Nations summit in Paris.
The Conservatives’ manifesto backed a significant expansion in new nuclear. DECC’s Policy Paper “2010 to 2015 government policy: low carbon technologies”, which was published on the day of the election, stated the Government’s aim to have the first new nuclear power stations generating electricity beginning around 2019. The Government is implementing measures to reduce regulatory and planning risks for investors in new nuclear. However the Government faces a number of challenges in the nuclear sector. The first is the further postponement of the plans for nuclear development starting at Hinkley Point in Somerset, a project that is backed by Amber Rudd. Two new reactors capable of supplying 7% of total UK electricity demand are planned. However, despite £10 billion of financial guarantees, funding is not in place, and there is an apparent reluctance of investors to commit such funding, which has widespread implications for the companies involved (Areva and EDF) and the future of nuclear energy in the UK.
Controversially, the Conservatives’ manifesto pledged to end support for onshore wind power, which provides the cheapest source of renewable energy and had previously received significant Government subsidy. It said: “We will end any new public subsidy for [onshore] wind and change the law so that local people have the final say on windfarm portfolios.” The manifesto further noted that onshore windfarms “are unable by themselves to provide the firm capacity that a stable energy system requires.” The wind industry has issued pleas for the Conservatives to reconsider their opposition to onshore windfarms.
UK North Sea Oil and Gas
The Conservatives have pledged to continue supporting the development of North Sea oil and gas. The Infrastructure Act 2015 requires the Conservative Government to draw up a strategy to maximize the economic recovery of UK oil. Historically the UK Government has tried to maintain investment in the aging UK North Sea via tax incentives. Recently, largely due to the fall in the price of oil, investment in new projects has fallen and billions of dollars of UK North Sea assets are up for sale. It is widely believed that the Government will have to introduce further bold oil tax changes to inject new life into the battered North Sea.
In recent times the UK Government has been supportive of shale gas development. However public opposition to fracking remains high and there has been relatively little shale gas exploration in the UK to date. The Infrastructure Act 2015 requires the UK Government to assess how the development of shale gas could fit with UK carbon targets. In its election manifesto the Conservatives said they “will continue to support the safe development of shale gas.” On the eve of the general election, David Cameron remarked there would be “no dash into [shale gas] technology without the safeguards in place”.