Edelman Energy Predictions 2014

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UK ENERGY OPINION FORMERS

2014 PREDICTIONS Introduction As with any industry involving long-term, often capital intensive, assets linked to the provision of an essential commodity, certainty is valued extremely highly by the energy sector. The temptation to make predictions (we tend to call them forecasts - it sounds more credible) is strong. Predictions allow for forward planning and strategic investment, as well as helping manage risk. Of course the more uncertain the future appears, the harder it is to make reliable predictions and the more uncomfortable an industry like energy becomes. The key opinion formers who have kindly contributed to this publication provide extremely varied and valuable insights into what the next year might hold. We are most grateful to them for taking a risk and sharing their thoughts. Uncertainty has arguably become the new normal for today’s energy industry. We are at a tipping point for many issues:

Jessica Lennard

Director of Energy Public Affairs, Edelman

where future energy supply will come from; how much it will cost; the degree to which it will be managed bottom up by communities, or top down by Governments. Consumers, largely absent from the debate thus far, have become central to it. A new future is coming into focus, but the transition is characterised by higher levels of risk and uncertainty than those experienced by the industry in many decades. This trend shows no signs of lessening in the near future. Three UK predictions from us for the next year: energy will become increasingly politicised ahead of the General Election; non-mainstream issues (community energy, independent generation, storage, heat and efficiency) will continue to enlarge their share of the policy space; and the trend toward increasing levels of policy intervention will peak as the tension between policy objectives, investor certainty and consumer frustration comes to a head.

Peter Atherton, Liberum Capital @LiberumAtherton The stresses seen in EU energy policy in 2013 are only going to increase in 2014. EU policy makers have grossly under estimated the financial, technical and economic difficulties in decarbonising the power sector by 2030. As policy makers have so far been unwilling or unable adjust their thinking to take account of the unexpected challenges, the capital markets have concluded that the policy is implausible. The UK is moving centre stage of the crisis as energy policy, and particularly its cost to consumers, forms a key element in the forthcoming general election. The recently signed Hinkley Point contract is going to receive intense scrutiny and is unlikely to survive as currently written. Indeed it is very unlikely that any ‘big ticket’ investments in UK power will get financial close in 2014.

Jonathan Brearley, Energy and climate change advisor @JonBrearley Energy will remain controversial and will undoubtedly stay on the front pages of our newspapers. The reason is this year and, for the next few years, we face a fundamental choice: We can choose a world where politicians and industry regain public trust and develop an energy market that treats all its customers fairly. Therefore, we can build public support for an investment programme that will keep the lights on and make a sensible transition to low carbon energy. The alternative is each side continue to blame the other for changing prices and we collectively ignore the science of climate change. This will generate such uncertainty that no one will invest without huge premiums, which will take more money out of the pockets of consumers. I am an optimist. With a talented team in DECC and investors preparing for the UK’s market reforms, 2014 may be the year we begin to build the 21st century energy system that the UK so badly needs.

UK ENERGY OPINION FORMERS 2014 PREDICTIONS

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