Mixed subsidy messages provokes investor uncertainty
London, UK. 08 September 2010: Government subsidy plans for nuclear, renewables and fossil fuels were under the microscope throughout August as investors and energy firms sought clarification on where the government’s support lies. In apparent contradiction to its previous perceived anti-nuclear subsidy stance, Chris Huhne confirmed that the government is fully behind new nuclear reactors coming online by 2018 (5.24% of coverage). How far the government will go in support of this target remains unclear as the carbon price remains too low to justify nuclear investment.
Further pressure was heaped on the government following a report by Bloomberg New Energy Finance showing that fossil fuel subsidies are roughly 12 times greater than those provided for renewable energy and biofuel industries, despite a G20 commitment to phase out this funding (3.56%).
In a tangible example of the impact of delayed regulation on the industry, Britain’s largest emitter of carbon dioxide, Drax Power, warned that its plan to convert six coal-fired power stations to biomass was under threat due to uncertainty over the government’s renewable subsidy programme.
“There is a real risk for the UK’s reputation as a leader in renewable energy following continued uncertainty as to which technologies the government supports and what the investment and regulatory framework behind them will be ”, said Alva’s CEO, Alberto Lopez-Valenzuela. “This undermines the attractiveness of the country to investors and jeopardises its ability to meet its emissions reduction targets”
At a domestic level there was further M&A activity, with French utility GDF Suez taking a 70% stake in British energy firm International Power for £1.4bn (5.02%). The merger leaves the market with two key UK players, Centrica and Scottish and Southern Energy.
“There is a potential concern for both government and industry that, given the complexity of the energy market, non-domestic ownership might create long term risks in energy supply and for industry reputation with consumers” Lopez-Valenzuela added. “One option is for the government to attempt to attract more local investors, ensuring that its energy policies encourage the engagement of UK businesses and target UK energy and emissions targets.”
Each month, corporate reputation analysis company Alva reports on the emerging and most prominent reputational risk issues in the Energy and Utility sector using information collected from its proprietary analytical tools.
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Summary of Energy and Utilities Industry Issues in June 2010
Alva analyses content from over 1 million mainstream media, blog, micromedia, forums, brokers notes and social networking sites
Top 10 Organisations
Department of Energy and Climate Change – 6.40%
E.ON – 6.23%
International Power - 5.92%
GDF Suez- 5.70%
British Gas- 5.50%
National Grid- 4.44%
Centrica – 3.28%
Scottish Power- 2.66%
Top 10 Stories
Chris Huhne urges local councils to lead 'green energy revolution'– 5.24%
International Power and GDF Suez seal deal with £1.4bn cash sweetener–5.02%
Fossil fuel subsidies are 10 times those of renewables, figures show–3.56%
BiFab awarded major tidal turbines contract–3.15%
Coal-fired power stations win reprieve– 2.72%
Energy bills set to soar– 2.28%
Corus plans £31.5m offshore wind monopile plant–1.93%
Sunny outlook for solar panels– 1.90%
Fifty days left to register for CRC– 1.44%
E.ON reports growth in profits for first half of 2010–1.39%
Renewable Energy- 21.67%
UK Infrastructure – 14.04%
Corporate – 13.82%
UK Production – 13.67%
Carbon Emissions- 8.97%
Energy Prices- 3.94%
Climate Change- 3.03%
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