I watched the entire debate — if it was a debate — on the Government’s Energy Market Reform Bill (EMR) in the House of Lords today.
For a chamber that is populated by people who are appointed on the basis of merit, replacing the feudal system, it was a very disappointing experience. It’s not simply that I disagreed with many of the comments; the problem is with their total mediocrity. Nigel Lawson and Matt Ridley made good arguments, but the putative ‘rebuttals’, were all of the kind we’re so used to hearing: the deference to the scientific consensus, and the litany of climate catastrophes that await us. The latter invariably consists of cobbled-together factoids. And the former, as ever, allows someone with very little brain power to marshal ignorance against a better-informed argument.
That much is old news. We’re used to that. But one theme came up often in the arguments in favour of the Bill that I hadn’t given too much thought to before: the apparent need to create ‘investor confidence’ in the renewable energy sector.
Hansard isn’t up yet, so I can’t refer to any of these arguments directly. (I imagine they’re still struggling to decipher Lord Prescott’s speech). But here are some comments made outside the house:
in order to secure maximum economic benefit for the UK, it is crucial that the Government gives certainty to investors by legislating to chart a clear course well beyond 2020. Only then will we be able to insure against the risk of much higher future energy prices; enhance Britain’s energy sovereignty; and protect ourselves against dangerous climate change.”
EMR will provide certainty to investors with long-term electricity price stability in low carbon generation
CfDs are designed to boost investment in low carbon technologies, including renewables, Carbon Capture and Storage (CCS), and potentially nuclear, by providing certainty to revenue streams, encouraging investment and finance
The government’s thinking appears to be that creating ‘certainty’ — i.e. eliminating risk — for investors will make them rush to put their money into the UK’s energy infrastructure.
But hold on a minute. When was ‘investment’ ever conceived of as a risk free opportunity?
I thought the deal with capitalism was that those who are fortunate enough to have surplus capital risk it for the possibility of a return. The idea is that you make decisions about what to invest on, based on your own knowledge, or someone else’s knowledge of a market.
When you take out a pension plan, for instance, you’re sometimes asked to state your attitude to risk. Risk and potential yield correlate. But note that, even with a low-risk pension, you’re not being sold certainty.
So what does this say about the Energy Market Reform Bill?
In what sense is it ‘reforming’ a market, when you promise investors that you will eliminate risk? In fact, in what sense is it a ‘market’ at all, if there is no risk? No risk, no competition, no market.
What the government seem to be proposing with the EMR is something more like a loan.
Moreover, some of the arguments for this ‘reform’ include the suggestion that big energy suppliers should be forced to announce their prices up to two years in advance, so that a more competitive retail market, and smaller scale producers can emerge. That can only push prices up. thereby benefiting the ‘investors’ — a surprising number of whom turned out to be speaking in the House of Lords today.