David Prosser: The ripple effect of well-intended energy policies

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The Independent Online

Outlook That the new Energy minister, Chris Huhne, delivered the first of what he promised would be annual energy policy statements less than three months after taking office is to be welcomed. We are running out of time to agree a strategy for closing the energy gap over the next decade, particularly with the demanding environmental targets we have set.

Still, there is a danger that Mr Huhne's statement, delivered last week, achieves little more than proving that old maxim about less haste and more speed. The immediate reaction was anxiety that his lukewarm support for nuclear power – the flipside of his determination that renewables must play a larger part in Britain's energy sector – might damage the chances of investment in that sector. And now the renewables sector is voicing its concerns too, specifically about Mr Huhne's narrow focus on wind power.

Such concerns were crystallised yesterday in the announcement by Drax that it is reconsidering its plans for a very sizeable expansion of biomass use. The company wants to spend several billion pounds building three new power stations that will be fuelled entirely by biomass. But though it is pleased that Mr Huhne now proposes to increase the subsidies available to the biomass sector, the fact that he also plans to review his policies in 2013 gives Drax a headache. Its new plants will not even be completed by then and could prove to be expensive white elephants if energy policy changes adversely.

It is an early lesson in cause and effect for the new Government. Mr Huhne's sense of urgency in addressing energy policy is to his credit and compares favourably to the slow progress made by his predecessors in office. But what seem like subtle policy announcements are already having a very significant impact on the energy industry, in ways that could cause problems for years to come.