Blackfriar: More clarity needed on how country can keep lights on

The UK’s energy conundrum is well known – aging power stations, dwindling domestic energy resources and the mounting pressure to clean up both.

The Government’s report on electricity market reform, and its associated renewable energy roadmap, are supposed to be the stick and carrot to both force and attract £110bn of investment needed to replace Britain’s tired coal and nuclear power plants. In their place must be built the equivalent of 20 greener power stations, plus significant upgrades to the grid.

“This package will keep the lights on and bills down,” proclaimed Energy and Climate Change Secretary Chris Huhne. “It will insure us against shocks from volatile parts of the world like Libya, and end the dithering about our need for new plant.” North Yorkshire power station operator Drax is one of the “ditherers” Mr Huhne referred to. Its plans for three standalone biomass plants, fuelled solely by organic plant-based material, are on hold while it waits for news on what subsidy biomass will receive.

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While it welcomed the renewable roadmap’s recognition of biomass in the future energy mix, Drax repeated its call for “an appropriate level of support” before it steps up investment.

Nuclear and offshore wind look to be the big winners in all of this. The roadmap pledged to step up renewable energy generation, so that it makes up 15 per cent of all energy by 2020. This will undoubtedly underline the Humber’s role as a home for offshore wind technology, bringing investment and jobs to the region on an accelerated scale.

By confirming a carbon floor price – whereby emitters must pay a top-up even if the price of carbon falls below a certain level – the Government also increased the burden on heavy polluters. Plants such as Drax will pay a heavier price, while nuclear plants’ costs could fall.

Certainty for renewable power generation will be provided through long-term contracts. This feed-in tariff with contracts for difference should ensure low carbon generators receive an agreed price, and also claw back money for consumers if price rise above the cost of low carbon generation.

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New rules will also ensure no new coal-fired plants are built without carbon capture and storage. Another policy which should underline Yorkshire’s role as an innovator in green technology, this will further the case for a carbon pipeline from the region’s polluters out to the North Sea.

Huhne described the task ahead as “Herculean”. Blackfriar would not argue with that.

Britain must reduce its reliance on fossil fuels, especially imports from troubled lands. But whether the private sector will step in and fill the £110bn investment gap – or £200bn according to analysts – remains to be seen. The energy sector has made positive noises, but that is a big step from actual investment. To do so they will need more clarity.

n Marketing specialist Communisis is having a roller coaster of a week. On Monday its shares dropped nearly eight per cent after the group said it expects an existing contract with HSBC Bank for direct mail services to be awarded to another supplier.

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The Leeds-based group said the switch follows a competitive tendering process. The contract, which is worth £7m a year, is terminable on one month’s notice.

This is one of the main worries for a company like Communisis and emphasises the need for it to spread its services far and wide.

No one client should have the power to dent its fortunes if they move their business elsewhere.

On the plus side, Communisis said its separate and significant contracts with HSBC for transactional statement and billing and cheque printing are unaffected.

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The group also gave the market some cheer with the news that a strong performance in other service areas mean its current expectations for overall group results for both 2011 and 2012 are unchanged by the contract loss.

There was more cheer late on Tuesday when the Payments Council announced that cheques will no longer be abolished in 2018. This means that cheques, which make up 10 per cent of Communisis’ sales, will continue for as long as customers need them.

The news was welcomed by consumer watchdogs. Which? described it as “victory for consumers” and “great news for the millions of people who regularly use cheques”.

Speaking to the Yorkshire Post yesterday, Communisis chief executive Andy Blundell said the group is delighted that the phase out of cheques has been scrapped.

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Now the challenge for the group will be to take cheques forward and give them a new lease of life.

Communisis is already on the case.

Blundell says the group is looking at ways to make cheques more attractive, including personalising them and improving security.