LEGAL EAGLES
TACKLING THE INCREASING PRESSURES IN THE ENERGY SECTOR
Square One Law was recently invited to participate in a debate, hosted by the North East Chamber of Commerce, which addressed the concerns and challenges facing participants in the energy industry. This was a wide ranging debate attended by significant participants from across the industry. The overriding concerns of developers and owners of energy assets focused on two major areas: continuing regulatory uncertainty and the widening skills gap in the market.
CONTINUING REGULATORY UNCERTAINTY
Despite a progressive year in relation to energy market reforms, many investors continue to take a cautious approach to financing capital intensive projects due to both volatility in the financial marketplace and a lack of certainty around the regulatory regime.
After months of scrutiny and media coverage the Energy Act received Royal Assent on 18 December 2013. Covering many sectors of the energy industry, this act sets out UK policy for decarbonisation targets, the promotion of renewable energy projects and the basis for reforming the electricity market. In the ‘Electricity Market Reform Delivery Plan’ published on December 19 2013, the Government predicts that the reforms will attract an additional £40 billion of investment into renewable energy projects and a further 10GW capacity for offshore wind projects by 2020.
It was hoped that the reforms set out in the Energy Act would bring a measure of certainty to the industry, and indeed they have been largely welcomed. However, there are concerns that the absence of a scheduled timeframe for implementation of the reforms and lack of clarity surrounding how the ‘Contracts for Difference’ (CfD) mechanisms will operate in practice are deterring investors and delaying investment decisions.
FEATURE SPONSOR
This nervousness in committing to energy projects may have a significant effect on the Government’s target to produce over 30% of the UK’s renewable electricity from renewable energy by 2020. In order to meet this ambitious electricity generation target, the industry would require a rapid increase in offshore wind project construction which would in turn require substantial investment in large scale capital projects.
SKILLS GAP
In addition to the uncertainty surrounding legislative changes, there is further perceived risk to investors that a skills gap is developing in the UK that may leave the industry struggling to meet the construction demands of new wind development projects.
A decline in the UK offshore industry’s ability to recruit highly skilled and experienced engineering, technical and operational experts to support development projects may lead to critical operational risks including construction delays, downsizing and, in some cases, cancellation of offshore wind projects altogether.
As the wind and renewable industries mature and progress towards no longer being reliant on central government initiatives, it is imperative that the industry develops the ability to recruit and train the key personnel required to deliver and operate renewable projects.
James Bryce Square One Law
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www.windenergynetwork.co.uk
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