Dennis Clark is a Conservative Party donor, and the Chairman of OGN Group in Newcastle, which manufactures oil and gas platforms.
Those of us who’ve been involved in UK energy over the past four decades have become increasingly concerned by the failure of the present government to support vital British interests in the sector. Amber Rudd, our fifth energy minister in as many years, is the latest in a long line of politicians who don’t seem to grasp the need for a coherent plan for ensuring our energy security and safeguarding jobs.
The plan outlined in her recent speech to the Conservative conference was nowhere near bold enough. She was hopelessly off-key on foreign investment in particular, citing her recent trip to China with the Chancellor to push for international financing of our nuclear infrastructure. This concept is doomed from the start. The reality of the situation is that the Government hands out guarantees to China for reactors that our regulators will reject before they are built, in the same way that it hands out onshore exploration licences for drilling that the general public will veto in overwhelming numbers.
She must rebuild confidence by pledging to appoint a group of independent experts to help her devise a long-term strategy to be completed within twelve months. That she hasn’t is due to the fact that energy policy is ultimately controlled by George Osborne and the Treasury. Their administration has overseen the collapse of drilling in the North Sea and the failure of a large number of planned offshore wind farm developments. The Chancellor refuses to allocate the cash required to boost these vital industries, focusing instead on fracking and nuclear as “low cost solutions” to the Exchequer.
The Energy Secretary has defended her about-turn on green subsidies on the basis of getting the balance right between supporting new low carbon technologies and protecting consumers. But by prioritising short term costs over long term planning and efficiency, the Government is shooting itself in the foot, and UK industry will be limping for years.
The subsidy cuts have resulted in chaos for both suppliers and consumers. Investors need to see that the Government is backing British industry. Many European countries have a head start over the UK in the offshore wind sector. These manufacturers have enjoyed huge grants and other financial support from their governments. Rudd should insist that all wind farm developers who enjoy Government support encourage the development of British manufacturing by placing long-term contracts in the UK. That’s how we’ll form the basis for future industrial development and investment.
The oil and gas sector requires similar attention. Research commissioned by her department shows that contracts placed overseas are both late and over budget. We should apply those lessons by insisting on a level playing field, and the Energy Secretary should be seek to persuade the Chancellor to limit tax and field allowances to project budgets so the British taxpayer doesn’t foot the bill for poor management and overspend.
On the UK’s energy supply, we must confront the issues facing National Grid – possibly the biggest of all the elephants currently in the room. Britain’s present grid is simply not sufficient to support the Government’s plan for new homes and industrial development, particularly in the Northern Powerhouse. We urgently need to review the capability of the grid within the development of a network that’s robust and future-proof enough to serve the UK for decades to come. Regulators need to look at the structure of the grid with a view to confirming that the current arrangement is fit for purpose and provides adequate focus on specific needs across the whole of the UK.
Rudd should commit to bold changes to drive a more commercial focus in government. Merging DECC and BIS would encourage industrial development, broaden expertise and generate significant cost savings to the benefit of the taxpayer. The new department should be owned and managed by the Government, but should have a board structure that includes independent directors from the private sector.
The lack of UK content specified in the major projects placed in the energy sector is becoming a major concern. It is costing the UK economy dearly in terms of lost jobs and business, and it’s unacceptable for the government to stand idly by.
Declining investment, the loss of key contracts overseas, ageing infrastructure and civil departments that are lacking in focus have left us far behind other developed countries. UK workers, consumers and businesses deserve better. The Energy Secretary urgently needs to send a clear signal that she’s ready to support British industry. The longer she does nothing, the worse off we’ll be.