Deloitte comments on the announcement of the Government’s Gas Generation Strategy
5 December 2012
Robin Cohen, partner in Deloitte’s Energy & Resources practice, said:
“Today’s publication of the Gas Generation Strategy reinforces the dramatic recent changes in the character of the UK electricity market from an investor’s perspective. Rather than assessing the viability of future power generation projects by analysing supply, demand and the resulting market prices, investors now need to anticipate the aggregate effect of several key policy measures, some of which have no track record as yet. These include the carbon price floor, contracts for differences within the levy control framework, the capacity mechanism and the UK’s response to the EU target model for electricity markets. While the strategy will be broadly welcomed by investors, it highlights the limits to the level of future certainty that the Government can provide. Given the scale of our future challenges, uncertainty will be a long-term characteristic of the market. Investors will now be determining how to deal with that regulatory uncertainty, rather than when it will disappear.
“The positive messages on the potential for shale gas, although tempered by realism on the timelines and challenges for the sector, will be welcomed by those involved in developing a potentially significant future energy resource for the UK.”
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