Carbon Diary: power market meets its maker
When Ofgem talks about power companies “sweating assets” you know something is up. So may I welcome Ofgem to the TUC’s energy podium, for a long-overdue meeting of minds?
Ofgem, February 2010: “The unprecedented combination of the global financial crisis, tough environmental targets, increasing gas import dependency and the closure of ageing power stations has combined to cast reasonable doubt over whether the current energy arrangements will deliver secure and sustainable energy supplies” (Project Discovery, 2010).
TUC, October 2006: “Faced with the new energy challenges of climate change and energy security, the UK’s liberalised energy market lacks the foundations on which to deliver the massive new investment required in low carbon and carbon-free energies” (TUC Executive Committee paper).
We said then: “With growing concern over the ability of our liberalised energy market to deliver on our key national interests of energy security and climate change, the fundamental challenge is to build a new relationship between the energy market and the wider national interest.”
Ofgem says now: up to £200 billion is needed by 2020 to replace “large parts of our ageing energy infrastructure.” Much more equity finance will be required to meet funding requirements. Currently the primary sources of such funding remain pension and infrastructure funds,
George Osborne yesterday: creating a Green Investment Bank would draw together existing government initiatives, leverage private sector capital “to finance new green technology start-ups and back the bright ideas of the future”.
Fine, but if Ofgem is right, funding is needed for more than bright ideas and green technology start-ups.
Ofgem commented that the costs will inevitably impact on the competitiveness of industry and business, without offering solutions to this key problem. It’s also now talking about a minimum carbon price that would provide “long term certainty for investors to bring forward low carbon investment.” Now when did I first hear that?