The Tories and Liberal Democrats may not have supported ministers over the recent energy review but James Close, client service partner to the DTI, reports that those in the industry were impressed.

Close, who has previously served on secondment as the head of the Treasury’s corporate and private finance team, said there had been “very effective” consultation and some very clear signalling – both at the political level and at the official level – as to what the key issues were.
“It’s extremely difficult to make sure you don’t disturb the market whilst you’re going through a policy review like this,” he explains. “The challenge is to try and make sure that the timescale between starting the review and getting to a point where there are results to announce is as small as possible. This is particularly important in an environment where new generation needs to come forward over the next few years.”

Close goes on to praise the “extraordinary” level of commitment from the energy review team. “And the way they dealt with a change of minister – bringing a new secretary of state [Alistair Darling] up to speed was also impressive. It was an example of good practice in terms of the quality of the underlying analysis and the quality of the data and information used. Consolidating all this in one place has been very effective.”

In the review the government recognised nuclear has a role to play – but the trade and industry secretary insisted that a new generation of plants was not the entire answer to Britain’s looming energy crisis. “The government believes that a mix of energy supply remains essential and we should not be over-dependent on one source,” Darling told MPs while announcing the review. He went on to warn that with supplies of North Sea oil and gas now dwindling, the UK faced a looming energy shortfall without fresh action. And he said that the threat of climate-change meant carbon dioxide emissions from energy supplies also have to be tackled.

Asked whether he is concerned that the looming transition to what is likely to be a Gordon Brown premiership will lead to a degree of paralysis in Whitehall, Close states that there is now an appetite within industry for ministers to keep up the momentum. However, he adds that there is normally some degree of tension between the big players in government, and the private sector has long become used to such a situation.

“There is always a tension in the system between a Treasury view, the department’s view and a Number 10 view,” he says. “The tension is important for effective policymaking and I think that this was the case in the review, which made it clear that the taxpayer was protected from having to foot the bill for nuclear new build.” Close believes that any tensions surrounding energy policy are not about personalities, but rather the specific policy issues involved. “After all, this has a massive impact on the UK economy in terms of reducing carbon emissions and having a competitive industry that is supported by low fuel prices – the result of which is less fuel poverty.”

The significance of energy policy to the prime minister has become clear in recent months. But Blair’s desire for it to form a component of his legacy has perhaps prompted the Conservatives and Liberal Democrats to be quick to set out their opposition to certain aspects of his policies. Shadow industry secretary Alan Duncan said the prime minister was “unable to reconcile his rhetoric with the reality of the policy announcement”, while Edward Davey, the Liberal Democrat industry spokesman, claimed that “by picking the nuclear option the government is imposing a stealth tax on every home”.

Nevertheless, Close insists that there is, in actual fact, much consensus in British politics over the issue. “The Conservatives are saying that nuclear might have a role to play but in a slightly different way to the government. They’re saying it is the ‘last resort’, while ministers are saying that on the basis of a level playing field, if nuclear comes forward, they won’t stand in its way. So there are subtle differences but the market feels there is a reasonable degree of political consensus.”

Close’s endorsement of the review comes after his firm acted as financial advisors to the review team in the DTI. E&Y supported the civil servants by providing in-depth financial analysis about the relative merits of different types of technology. “We were also involved in providing financial information around waste and decommissioning costs,” Close adds. “And we spent some time with Morgan Stanley, working on market soundings – we wanted to get the perspectives and opinions of the CEOs of the utilities, and test and challenge some of the specific ideas and thoughts that were coming out of the review team.”

Was it a smooth process working with the civil service? “Yes, it was. It was a bit of an unusual appointment because there wasn’t a specific task that needed to be undertaken. We had to be pretty flexible in the way we operated and functioned, and that put quite a lot of pressure on us to manage our resources and scope in the most efficient way. Hopefully we achieved that and delivered value for money. But there were certainly areas of expertise that we provided that it’s very hard for government to get access to.”

Asked for specifics, Close cites the provision of specialist financial information and support on the alternative costs of different types of generation. “We’ve also done an enormous amount of work on renewables, so we were able to apply this information and our Renewables Energy Country Attractiveness Index is quoted in the review document.”

Close adds that having one of his team seconded to the review team worked well. “She delivered very deep modelling, financial and energy expertise that would have been hard for the civil service to match – principally because they don’t need that skill for the long term,” he says. “Having her there made for a much more effective way of working and a more cost-efficient way of getting access to that sort of expertise.”

Turning to the future timeline, Close says that he expects a white paper to come out in the spring, but warns that ministers do not have an indefinite period of time before they are going to have to take some hard decisions. “If it’s going to be nuclear, you’re going to have to be pretty clear that you need to start pouring concrete for some of these reactors by 2012. This means there will have to be quite a rapid period of planning, consenting and licensing for all of that.”

Fortunately, Close says, many of the review team are staying together. “There’s clearly a lot of work still to do but it does set a very good foundation. The review team has been well constructed and a lot of the people are still going to be there going forward. This bodes well for the future.”