Too much government meddling undermines the energy market

Pity Ed Davey. At some point in the next few months, the Energy and Climate Change Secretary is going to have to sit down and decide how much nuclear power is going to cost for the next few decades.

It is not an easy decision. On one side are nuclear firms threatening to pull out of building new power plants if they do not get the price they want. All those jobs not created. All that low carbon energy not generated. All those windfarms that will have to be built instead, with all their protest groups and angry backbench Tories. On the other side are households and business, already worried about rising energy bills. And don’t forget those greens, many of whom are hostile to nuclear power and ready to protest to prove it.

It is not as though it is the only decision in his in-tray. Coalition infighting this week prevented the long-awaited announcement of subsidies for wind turbines and other renewable technologies. A decision is now expected in the autumn. Investors are angry, WWF is angry, the CBI is angry. We now have the situation where it is likely the Prime Minister is going to have decide how much subsidy windfarms should receive. How did we get to this ludicrous position, and how do we get away from it?

In recent years, government has moved to make more and more decisions in the energy market. The new Energy Bill going through parliament could even require officials to decide how much new gas-powered generation will cost.

This government takeover of the energy market creates major risks. No matter how much you model and consult, no matter how wise the experts making the decisions, things will happen in the future that you could not predict.

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