12 July Guardian

When the energy crisis comes around 2018, remember George Osborne and co, and how they misread the markets.

Sometime in 2018 or shortly thereafter, the UK will experience a crisis. Electricity supply will not be enough to meet demand. When this happens, people will look back to 2012 and the disastrous policy decisions taken by the UK.

The first is the publication of the draft bill on electricity market reform. The second is the imminent decision to cut potentially as much as 25% from onshore windfarm subsidies.

What has become clear is that the government cannot rely on the market to supply the £110bn of investment in generating capacity that will be required to replace the old nuclear and coal power stations, which are likely to be turned off after 2017. What should perhaps cause the most surprise is that it is George Osborne and the Treasury who have so singularly failed to understand the logic of the markets.

At no time in the past 10 years has investment in Europe's energyexceeded €70bn, yet the government's plans are based on the assumption that in every year of the next seven years investment must exceed €80bn. This is at a time when the utilities sector across Europe has been derated by 40% against the rest of the market and when European utilities have been derated sharply against utilities in the rest of the world. The uncomfortable truth is that investors can achieve higher returns in other sectors or in the same sector in other parts of the globe.

View the full blog at the Guardian