In order to prevent serious interruptions in the UK’s electricity supply from the middle of the decade, an investment of approximately £200 billion in new electricity generating capacity is required by the year 2020. Achieving this at the best of times would be a huge challenge; the current economic climate the UK faces makes it even harder.
The four-year programme of spending cuts that the coalition government is making to decrease the public deficit means that the scope for the government itself to invest in the necessary energy infrastructure to ‘keep the lights on’ is reduced. Private sector finance is available to fill this gap; however, investors must be reassured that the risks of doing so can be minimal. In addition the market for energy infrastructure investment is globally competitive as the estimated investment requirement for 2020 for the European Union alone is €1 trillion.
The main challenge for the government will be to ensure that the perception of risk in the investment environment in the UK is reduced to the fullest extent possible.
Energy-from-Waste (EfW) is just one of the technologies that will need to be deployed over the next few years in order to meet the UK’s energy needs. Indeed, 2011 will be crucial in determining whether the UK’s future policy framework is attractive for investment in such infrastructure and this will be based on the following factors:
- The coalition government has set about redefining the financial framework including proposals for an energy market reform package that includes the creation of a mechanism to underpin the price of carbon and a new regime of fiscal support for renewable energy. This will need to be effective in drawing end users towards renewable energy.
- A review of waste policy designed to deliver a zero waste to landfill approach, recognising the part that EfW can play in delivering both landfill diversion and low carbon energy and climate change objectives. Including EfW as part of the solution will be a positive signal to developers, planners and procurement teams.
- The Localism Bill, currently in parliament, that proposes fundamental changes to the planning system and new powers for communities to determine what happens in their community in terms of both development and the provision of local services.
These separate agendas must be aligned and seek to address the barriers that might block investment and development in the UK. If the government gets the answers right, it will define the UK’s position as an attractive investment location, especially for EfW. If the government gets the answers wrong and adversely alters the balance of risk, capital will find homes elsewhere.
Malcolm Chiltern is managing director of Covanta Energy