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Shifting sands – four post-election energy challenges for the Government to navigate

Written by Michael Zdanowski, Head of Madano’s Energy Practice

 

For the energy sector, a hung parliament creates significant challenges across a range of difficult policy areas.

However, with swift action and clever positioning, it also presents a number of opportunities to influence policymakers and shape the UK’s post-Brexit narrative:

1) Delays to large infrastructure projects

A number of major initiatives are currently in the pipeline like HS2, Heathrow’s third runway, new build nuclear, and a pathfinder tidal lagoon project in Swansea Bay.

Ministers will find it more difficult to secure backing for potentially controversial projects.  There is backbench opposition to expanding Heathrow, and recent plans for nuclear plants have faced setbacks, which will require Government-led solutions. 

On the other hand, with HS2 and tidal lagoons, there may be a cross-party majority in favour of sign-off.  As with all infrastructure projects, a strong message on wealth, jobs, and export potential could help to win over a government desperate to present itself as in control, forward-looking, and trade-focused.

2) Likely market intervention

Despite the inconclusive election result, there remains political consensus in favour of energy market intervention. But it is far from certain what form this will take.

Larger energy companies are certain to step-up efforts to convince BEIS to water down its plans. It’s hard to see how ministers can resist this pressure, given their precarious position.

It will be critical for companies on all sides of the debate to find their voice and communicate effectively on the risks and opportunities that come with intervention in consumer markets.

3) Brexit just got a lot more difficult

There is now a major question mark over the shape of the Government’s plan for Brexit negotiations, due to start this month.

The internal energy market and Emissions Trading Scheme (ETS) were not major campaign features, leaving the direction of travel unclear. On EURATOM, Labour and others support continued membership, but without knowing the Conservative position it’s too early to tell what will happen.

It has been reported that senior ministers have urged Theresa May to drop plans to leave the single market, while BEIS Secretary Greg Clark has moved to generate momentum for a “business-friendly” Brexit. It is crucial for companies to seize on this chance to shift the agenda in their favour.

4) Lack of bandwidth across government

After years of civil service cuts and with a weakened hold over Parliament, the Government has almost no bandwidth to make progress on difficult issues.

Along with passing the ‘Great Repeal Bill’, likely to be the UK’s most complex ever legislative project, there is a massive backlog of energy initiatives jammed in the machinery of Government.

Announcements and papers are imminently due on a range of issues including the Industrial Strategy, Air Quality Plan, and a roadmap for small modular reactors (SMRs).

Ministers will be looking for ‘easy-wins’, meaning that proponents of particular projects will need to convince the Government that their agenda is both easy to achieve and beneficial to the country.

Charting a course

The next few months are going to be unpredictable, with potential for change at any moment.

The best thing for energy sector companies looking to change policy will be to formulate rapidly a cohesive communications strategy and make their case to influencers across Government. 

By moving quickly, companies could achieve a great deal amid an uncertain climate and a new reality.

Madano’s Energy Practice advises a range of domestic and international energy clients across the industry. The team helps clients tell their story against the backdrop of profound transformation and disruption in the energy sector through strong insights and research, strategy, narrative and message development, government stakeholder and media relations work, as well as content development.