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IJESM
1,3

SHORT NOTE

New directions in UK energy policy

Peter Cameron
CEPMLP, University of Dundee, Dundee, UK

218
Abstract

Purpose The purpose of this short note is to briefly present the salient features of the new energy
policy directions outlined in the recently published White Paper on energy policy by the UK
Government. It also aims to present some critical thoughts on the new policy directions.
Design/methodology/approach The note is based on the authors review of the White Paper and
his critical analysis.
Findings The note indicates why the issuance of this White Paper is of wider interest. The author
finds the paper sketching a highly ambitious view, envisaging a leadership role to the country in the
climate change issue and continuing with the deep-rooted belief in the markets with a minimalist
government intervention in the sector. He also questions whether private investment in energy
infrastructure would be forthcoming to ensure supply security and mitigate the climate change
problems identified in the White Paper as the two important long-term issues facing the country.
Originality/value The value of this note lies in its succinct synthesis of the White Paper and the
quick reaction to the new policy directions provided by the author based on his experience and
understanding.
Keywords Energy management, Government policy, Investors, United Kingdom
Paper type General review

International Journal of Energy Sector

Management
Vol. 1 No. 3, 2007
pp. 218-220
q Emerald Group Publishing Limited
1750-6220
DOI 10.1108/17506220710821107

At the end of May 2007 the UK Government published a discussion document or

White Paper on energy policy called Meeting the Energy Challenge (DTI, 2007).
It attempts to identify and address the key challenges facing UK energy policy in the
transition from the North Sea era to one of significant import dependence.
On the face of it, there might be nothing remarkable about the issue of a new
energy policy paper by a European Government. However, the UK has four special
features from an energy point of view that make the paper of more than local
significance. Firstly, it has been the pioneer of a view of the relationship between the
state and markets that is usually associated with the term liberalisation where
market forces are given considerable scope and government is required to adopt a less
interventionist role, with clear roles allocated to mediating bodies such as energy
regulatory agencies. It achieved considerable popularity internationally from the 1990s
but is increasingly contested, and often rejected by countries highly dependent on
petroleum exports. This limited view of the role of government in energy markets is
deeply embedded in UK policy. Secondly, the UK has assumed a leadership role in the
drive for measures to combat the effects of climate change. The achievement of its
targets will require significant changes in its domestic energy economy and potentially
large costs, despite the fact that the UK is not a major source of carbon emissions.
Thirdly, after years of energy self-sufficiency the UK is becoming a net importer of
fossil fuels, and in that respect is coming to resemble the energy profile of a large
number of countries, especially European ones, that need to design their energy
policies around this fact of net dependence. Finally, the UK Government has made it

clear in a number of statements that it considers a revival of its domestic nuclear power
industry as essential if this condition of dependence is to be balanced with some
domestic strategic decision-making. Nuclear power remains unpopular and is
perceived as relatively expensive, but in an earlier review (in 2006) of the energy sector
the government concluded that it was essential for long-term energy security.
The energy profile of the UK can be summarised as follows. Currently, oil and gas
provides 75 per cent of total energy requirements, but the UK is set to become a net oil
importer by 2010 and gas imports are set to grow sharply. Coal is still a major
contributor to the generation of power. However, the closure of coal and nuclear plants
by 2015 and 2023, respectively, will create a generation gap and a long-term future
for coal is not possible unless a solution is found to its heavy carbon emissions.
Moreover, the growth in renewable energy use appears likely to slow down without
further support.
In this context, the 2007 White Paper argues that there are not one but two long-term
energy challenges facing the UK: firstly, how to tackle climate change by reducing
carbon dioxide emissions both within the UK and abroad and secondly, how to ensure
secure, clean and affordable energy as the UK becomes increasingly dependent on
imported fuel. This double focus is in contrast with the view in the previous White Paper
of 2003 which placed its emphasis almost exclusively on the former (and related
problems), and downplayed the long-term security implications of import dependence.
That earlier foray into energy policy-making also not coincidentally ignored the
issue of nuclear power in future UK energy generation, focussing instead only on
clean-up issues arising from the legacy of past nuclear power plants.
The strategic drivers behind this new view are fourfold: firstly, the growing
evidence of impacts from climate change and the need for cooperation in cutting CO2
emissions; secondly, the steady rise in fossil fuel prices and a slower liberalisation of
energy markets among its European neighbours; thirdly, a greater awareness of the
risks of concentration of the remaining oil and gas reserves in the Middle East and
North Africa, Russia and Central Asia, and finally, a need within the UK itself for
greater investment by companies in energy infrastructure.
The main solutions offered are a new emphasis on clean coal, the encouragement of
private investment in nuclear power, the continued promotion of investment in oil and
gas sector and an extension of the renewables support mechanism (the RO). However,
against these possible solutions are the following: clean coal technologies require an
alteration of international legal frameworks; nuclear power remains unpopular and
there are significant planning issues involved with new build reactors (with a
constitutional dimension since devolution was introduced in 1997). There is also the fact
that the UK cannot halt a growing inter-dependence in energy with the rest of Europe.
The framework offered by the White Paper is lengthy the report runs to more
than 350 pages and very detailed. A key feature is that private investment is
required to make things happen. The role of government is to provide a framework
for such investment. For example, in the nuclear sector it is the task of government to
make significant changes to the planning laws to allow siting of new structures to be
carried out with much greater speed. The current legal regime allows public inquiries
to hold up the construction of plants for many years. Indeed, these problems are
common to large infrastructure projects in both energy and non-energy sectors
(and not only in the UK). This reflects the continuing influence of a view of government

New directions
in UK energy
policy
219

IJESM
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220

as essentially a limited one in energy markets following two decades of liberalisation,

now deeply rooted in the UK.
But will that private investment happen? In no less than 13 areas consultation is
taking place about government initiatives and planning laws are to be revised, an
unstable context for private investment. For the nuclear sector, the governments
consultation process has been successfully challenged in the courts by Greenpeace.
More fundamentally, the liberalisation process over the past 20 years has owed a great
deal to the extensive public sector investments in infrastructure made in the
pre-liberalisation period. The long period of asset-sweating has come to an end and
new investment in ageing networks is essential. Will the private sector be keen to
invest not only on the scale required but also in spare or redundant capacity in the
interests of national security?
It is an ambitious view that is sketched out in the White Paper, with a leadership
role envisaged for the UK in tackling climate change, and high expectations of what the
market can deliver in terms of future investment. It will trigger debate and a
significant number of legislative proposals. It raises questions about the compatibility
of ambitious climate change targets with a policy of keeping the cost of energy at
affordable levels, and whether markets can generate the scale of investment required
to provide long-term energy security.
Reference
DTI (2007), Meeting the Energy Challenge, Cm 7124, Department of Trade and Industry, London,
available at: www.dti.gov.uk/files/file39387.pdf (accessed June 10).
Corresponding author
Peter Cameron can be contacted at: peterdcameron@btinternet.com

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