What's in Ed Miliband's in-tray?

Tying up the loose ends of the last Government

Labour’s big ticket energy measures are well known - decarbonising power by 2030 and setting up a state-backed energy company called Great British Energy. I’ve written about GBE quite a bit, and have a paper coming out on the exciting challenge of 2030 later this week. So this post is instead about one of the less known aspects of changing Government: what a new Government does with all the dangling initiatives of the former.

You might think that these are automatically cancelled after the election. The reality is that hundreds of civil servants have jobs about this initiatives, and it’s hard to not get attached to something you may have spent years of your life working on. So all of these teams will be sending up submissions to the new Secretary of State’s inbox that in roundabout ways are asking whether they still have a job. This post will evaluate a few of these, and provide a view about how at risk they are.

The framing for this will be how this measures contribute (or not) to Labour’s big two measures above, as well as the actual politics and practicality of the measure. We’ll start off with the big one for electricity nerds everywhere:

The Review of Electricity Market Arrangements

Intended to make the power market fit for purpose for the Conservatives’ 2035 power decarbonisation target, this package of measures can be summarised best by its two most radical reforms:

• More locational signals in the electricity wholesale market, ensuring both more efficient dispatch of generators plus better siting of new assets, and;

• A revamped Capacity Market capable of paying for enough gas capacity to ensure the lights stay on during a long period of low wind and dark skies during winter.

The problem with changing the wholesale market just when you need people to invest in generation to deliver a 2030 target is that all of the people you need to invest will quite reasonably ask, “What price can I expect to get from my investment?”. Telling them they’ll find out in about five years when there’s a track record of price formation isn’t really going to fly.

A different problem faces Capacity Market reform, which is that Labour have explicitly committed to a strategic reserve for those gas assets - effectively, buying them directly and not being on the hook for capacity contracts. This implies this reform is already dead, although some of the smaller changes - such as a special allocation for long duration energy storage - are likely to survive, as such assets will be needed for 2030.

My expectation is therefore that much of the REMA package will fall away and the civil servants involved will be rapidly redistributed to the new Government’s priorities. Minor reforms may hang on as outlined above, but locational pricing is almost certainly dead. That being said, Miliband will be reluctant to annoy Greg Jackson so early in his tenure, so I expect some options for locational signals to be explored further.

VERDICT: AT RISK

Sizewell C

Although nuclear did not feature significantly in the campaign, the final investment decision for Sizewell C was expected to come out during it. For obvious reasons it did not, and Sizewell will very much be working its way into Miliband’s in-tray. Although for various complex governance reasons this isn’t explicitly his decision, in practice if he doesn’t want it to go ahead it won’t.

However, it featured in the Labour manifesto and being able to bank FID on a new nuclear power plant so early in the new Parliament has significant political upsides. I would be very surprised if FID doesn’t happen before the end of the year.

VERDICT: HAPPENING

Clean Heat Market Mechanism

Before leaving office the Conservatives covered themselves in glory by delaying the implementation of the CHHM for another year for reasons that can only be described as political. What they left undone, however, was the passing of the regulations that implemented the scheme regardless of when it was due to start.

Despite Miliband pushing back the Conservative’s gas boiler ban, he is on record as praising the CHMM and so I would expect him to sign off these regulations when they’re put on this desk. That being said, I also expect this to be done reasonably quietly to avoid the right-wing press screaming about heat pumps eating babies.

VERDICT: HAPPENING

A New Carbon Plan

One of the fun things that got lost in the election campaign was the Government’s defeat at the High Court on the latest iteration of its legally binding plan for delivering carbon budgets. The grounds for the defeat were that the plan was unevidenced and the prior Secretary of State could not reasonably believe it could be achieved.

Labour will be extremely reluctant to face the same fate but will also be reluctant to spell out some of the more challenging policies so early in its term without digging into them first. The Government has until May 2nd next year to produce a new version of the plan; I expect them to use all of that time and potentially ask for an extension.

VERDICT: HAPPENING IN SLOW TIME

Retail Reform

The prior Government had announced its intention to proceed with some limited reforms to the retail market for the purposes of protecting consumers, while leaving some of the challenging questions until later. This was part of a general reluctance to engage with this market very much following the energy crisis, and allowing questions about social tariffs and other reforms to die off.

However, the Labour manifesto specifically calls for reform of the retail market, but leaves a lot of detail to be filled in. This is not unreasonable - this is a painfully complicated marketplace that directly impacts a vital service for everyone in the nation. That being said, this commitment places a rocket behind these measures, and I now expect them to come faster.

VERDICT: HAPPENING FASTER

I haven’t covered everything off in the deluge of submissions that awaits the new Secretary of State; questions about fusion power, about heat networks and about green gas will be in there too. But what I hope the above reveals is that despite having a very clear programme for Government, grinding through the existing initiatives will take Miliband some time. The challenge will be to maintain pace in the face of a large number of civil servants who don’t want their existing work to be wasted.