A “Long Night” Ahead?

by Dale Edwards, strategic consultant – green energy and ESG, Clarke Willmott

“Eight thousand years before the Targaryen Conquest, a winter known as the Long Night descended up on the world, which lasted an entire generation.”

Rising energy costs, inflation at levels not seen for decades and new bank base rate rises have led to forecasts that a Game of Thrones-style “Long Night” is in prospect for the UK.

While this doomsday scenario may be exaggerated, there is no doubt that the economy is heading into choppy waters and that there is a need for a bigger role for renewables in our energy mix.

It was pleasing that within days of Liz Truss taking office, the new government announced plans to provide a two-year energy bill freeze for households, along with a six-month scheme for businesses and other non-domestic users.

While this is welcome, this is based on the typical household not having to pay more than £2,500 a year, which is still significantly higher that it was in 2021, at circa £1,300 a year. Homeowners in energy inefficient homes or those reliant on oil are likely to be disproportionately affected.

Meanwhile the business owners I speak to say that more detail is urgently needed on what this package will actually look like – and that six months is not long enough when trying to plan for the short to medium term, with some difficult decisions having to be made very soon.

Against the backdrop of the war in Ukraine, it is understandable that the emphasis has shifted towards energy security with concerns about blackouts and “brownouts” growing in frequency in the UK and across Europe.

It would be logical to think that UK-based clean energy will have a significant part to play in energy security in the long term, but with renewed conversations taking place around fracking and “new oil” to bridge the gap in the short-term, reassurance is needed that we will not be blown off course in achieving net zero.

In some respects the decision to remove green levies from energy bills for a period is counter-intuitive, but the government intends that these levies will be collected through taxation for at least the next two years.

In addition the government has signalled that a new voluntary contract for difference mechanism would enable existing renewable generation at lower prices. As with all new initiatives the devil will be in the detail, with many questions still to be answered.

There are challenges ahead which will be devastating for some businesses, and uncomfortable for many others. Over the coming weeks and months, it will be interesting to see how the government addresses the energy crisis to ensure that the UK avoids a Game of Thrones scenario from developing.

Energy prices are likely to remain high for a number of years and while some of the apocalyptic suggestions of a “Long Night” lasting an entire generation are wide of the mark, some urgency is required to incentivise developers by removing or relaxing the barriers to growth in clean energy.

Clarke Willmott is a national law firm with offices in Birmingham, Bristol, Cardiff, London, Manchester, Southampton, and Taunton.

For more information visit www.clarkewillmott.com