Good things don't come for free

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Adam Barber
January 17, 2013
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This content is from our archive. Some formatting or links may be broken.
Good things don't come for free

It seems that sometimes the electricity markets suffer with an issue of perception.

Perhaps it’s because electricity is pretty intangible – we flick a switch and computers, televisions, kitchen appliances spring into life. Yet it’s no different to any other part of the national infrastructure – be it the railways, sewerage systems or road network.

However, when it comes to the question of investment, its development costs always result in opprobrium being heaped upon the sector from somewhere.

This week, it was the turn of the UK’s offshore transmission (OFTO) regime to be brought under the microscope. With the instrument being wielded by no lesser a body than the Parliamentary Public Accounts Committee (PAC) chaired by Labour MP, Margaret Hodge.

The committee’s main criticism was that the OFTO regime had failed to learn the lessons of the Private Finance Initiative and was skewed to providing a better deal for investors than consumers, through Government guarantees.

Whilst the PAC will be reacting with sensitivity to the potential for increasing domestic electricity bills, there is perhaps an argument to say that the bigger picture has been missed.

Firstly, the construction of offshore transmission networks will result in significant subcontracting to a host of different providers, who will contribute to the economy through taxable income earned from the work.

And secondly, whilst these incentives may be considered by the PAC to be overly generous, the liabilities attached to building and operating such an asset are not insignificant, even when supported through a subsidy regime.

In future, these assets may also provide a new investment class for the pension funds of workers UK wide, providing a secure 20-year return that’s not always available in other bonds and equities.

And all this is not withstanding the fact that to have the offshore transmission network sitting on the Government’s balance sheet would be a significant risk.

Something that would place an additional burden on the already stretched public finances.

Ultimately then, consumers would end up paying through their taxes rather than through their energy bills. The latter, at least, is being open to a degree of self-management and regulation.

So it’s because of all this that there’s an inescapable and uncomfortable truth - the cost of large infrastructure projects will increasingly have to be met through the public purse.

Gone are the days of private companies building national scale projects on the balance sheet.

Therefore, the biggest challenge lies in communicating to end users that the cost of electricity has essentially been subsidised for the long term. For the future.

After all, it’s imperative that consumers begin to recognise that security of supply, low carbon generation and a 21st Century National Grid are costs worth paying for.

It seems that sometimes the electricity markets suffer with an issue of perception.

Perhaps it’s because electricity is pretty intangible – we flick a switch and computers, televisions, kitchen appliances spring into life. Yet it’s no different to any other part of the national infrastructure – be it the railways, sewerage systems or road network.

However, when it comes to the question of investment, its development costs always result in opprobrium being heaped upon the sector from somewhere.

This week, it was the turn of the UK’s offshore transmission (OFTO) regime to be brought under the microscope. With the instrument being wielded by no lesser a body than the Parliamentary Public Accounts Committee (PAC) chaired by Labour MP, Margaret Hodge.

The committee’s main criticism was that the OFTO regime had failed to learn the lessons of the Private Finance Initiative and was skewed to providing a better deal for investors than consumers, through Government guarantees.

Whilst the PAC will be reacting with sensitivity to the potential for increasing domestic electricity bills, there is perhaps an argument to say that the bigger picture has been missed.

Firstly, the construction of offshore transmission networks will result in significant subcontracting to a host of different providers, who will contribute to the economy through taxable income earned from the work.

And secondly, whilst these incentives may be considered by the PAC to be overly generous, the liabilities attached to building and operating such an asset are not insignificant, even when supported through a subsidy regime.

In future, these assets may also provide a new investment class for the pension funds of workers UK wide, providing a secure 20-year return that’s not always available in other bonds and equities.

And all this is not withstanding the fact that to have the offshore transmission network sitting on the Government’s balance sheet would be a significant risk.

Something that would place an additional burden on the already stretched public finances.

Ultimately then, consumers would end up paying through their taxes rather than through their energy bills. The latter, at least, is being open to a degree of self-management and regulation.

So it’s because of all this that there’s an inescapable and uncomfortable truth - the cost of large infrastructure projects will increasingly have to be met through the public purse.

Gone are the days of private companies building national scale projects on the balance sheet.

Therefore, the biggest challenge lies in communicating to end users that the cost of electricity has essentially been subsidised for the long term. For the future.

After all, it’s imperative that consumers begin to recognise that security of supply, low carbon generation and a 21st Century National Grid are costs worth paying for.

It seems that sometimes the electricity markets suffer with an issue of perception.

Perhaps it’s because electricity is pretty intangible – we flick a switch and computers, televisions, kitchen appliances spring into life. Yet it’s no different to any other part of the national infrastructure – be it the railways, sewerage systems or road network.

However, when it comes to the question of investment, its development costs always result in opprobrium being heaped upon the sector from somewhere.

This week, it was the turn of the UK’s offshore transmission (OFTO) regime to be brought under the microscope. With the instrument being wielded by no lesser a body than the Parliamentary Public Accounts Committee (PAC) chaired by Labour MP, Margaret Hodge.

The committee’s main criticism was that the OFTO regime had failed to learn the lessons of the Private Finance Initiative and was skewed to providing a better deal for investors than consumers, through Government guarantees.

Whilst the PAC will be reacting with sensitivity to the potential for increasing domestic electricity bills, there is perhaps an argument to say that the bigger picture has been missed.

Firstly, the construction of offshore transmission networks will result in significant subcontracting to a host of different providers, who will contribute to the economy through taxable income earned from the work.

And secondly, whilst these incentives may be considered by the PAC to be overly generous, the liabilities attached to building and operating such an asset are not insignificant, even when supported through a subsidy regime.

In future, these assets may also provide a new investment class for the pension funds of workers UK wide, providing a secure 20-year return that’s not always available in other bonds and equities.

And all this is not withstanding the fact that to have the offshore transmission network sitting on the Government’s balance sheet would be a significant risk.

Something that would place an additional burden on the already stretched public finances.

Ultimately then, consumers would end up paying through their taxes rather than through their energy bills. The latter, at least, is being open to a degree of self-management and regulation.

So it’s because of all this that there’s an inescapable and uncomfortable truth - the cost of large infrastructure projects will increasingly have to be met through the public purse.

Gone are the days of private companies building national scale projects on the balance sheet.

Therefore, the biggest challenge lies in communicating to end users that the cost of electricity has essentially been subsidised for the long term. For the future.

After all, it’s imperative that consumers begin to recognise that security of supply, low carbon generation and a 21st Century National Grid are costs worth paying for.

It seems that sometimes the electricity markets suffer with an issue of perception.

Perhaps it’s because electricity is pretty intangible – we flick a switch and computers, televisions, kitchen appliances spring into life. Yet it’s no different to any other part of the national infrastructure – be it the railways, sewerage systems or road network.

However, when it comes to the question of investment, its development costs always result in opprobrium being heaped upon the sector from somewhere.

This week, it was the turn of the UK’s offshore transmission (OFTO) regime to be brought under the microscope. With the instrument being wielded by no lesser a body than the Parliamentary Public Accounts Committee (PAC) chaired by Labour MP, Margaret Hodge.

The committee’s main criticism was that the OFTO regime had failed to learn the lessons of the Private Finance Initiative and was skewed to providing a better deal for investors than consumers, through Government guarantees.

Whilst the PAC will be reacting with sensitivity to the potential for increasing domestic electricity bills, there is perhaps an argument to say that the bigger picture has been missed.

Firstly, the construction of offshore transmission networks will result in significant subcontracting to a host of different providers, who will contribute to the economy through taxable income earned from the work.

And secondly, whilst these incentives may be considered by the PAC to be overly generous, the liabilities attached to building and operating such an asset are not insignificant, even when supported through a subsidy regime.

In future, these assets may also provide a new investment class for the pension funds of workers UK wide, providing a secure 20-year return that’s not always available in other bonds and equities.

And all this is not withstanding the fact that to have the offshore transmission network sitting on the Government’s balance sheet would be a significant risk.

Something that would place an additional burden on the already stretched public finances.

Ultimately then, consumers would end up paying through their taxes rather than through their energy bills. The latter, at least, is being open to a degree of self-management and regulation.

So it’s because of all this that there’s an inescapable and uncomfortable truth - the cost of large infrastructure projects will increasingly have to be met through the public purse.

Gone are the days of private companies building national scale projects on the balance sheet.

Therefore, the biggest challenge lies in communicating to end users that the cost of electricity has essentially been subsidised for the long term. For the future.

After all, it’s imperative that consumers begin to recognise that security of supply, low carbon generation and a 21st Century National Grid are costs worth paying for.

It seems that sometimes the electricity markets suffer with an issue of perception.

Perhaps it’s because electricity is pretty intangible – we flick a switch and computers, televisions, kitchen appliances spring into life. Yet it’s no different to any other part of the national infrastructure – be it the railways, sewerage systems or road network.

However, when it comes to the question of investment, its development costs always result in opprobrium being heaped upon the sector from somewhere.

This week, it was the turn of the UK’s offshore transmission (OFTO) regime to be brought under the microscope. With the instrument being wielded by no lesser a body than the Parliamentary Public Accounts Committee (PAC) chaired by Labour MP, Margaret Hodge.

The committee’s main criticism was that the OFTO regime had failed to learn the lessons of the Private Finance Initiative and was skewed to providing a better deal for investors than consumers, through Government guarantees.

Whilst the PAC will be reacting with sensitivity to the potential for increasing domestic electricity bills, there is perhaps an argument to say that the bigger picture has been missed.

Firstly, the construction of offshore transmission networks will result in significant subcontracting to a host of different providers, who will contribute to the economy through taxable income earned from the work.

And secondly, whilst these incentives may be considered by the PAC to be overly generous, the liabilities attached to building and operating such an asset are not insignificant, even when supported through a subsidy regime.

In future, these assets may also provide a new investment class for the pension funds of workers UK wide, providing a secure 20-year return that’s not always available in other bonds and equities.

And all this is not withstanding the fact that to have the offshore transmission network sitting on the Government’s balance sheet would be a significant risk.

Something that would place an additional burden on the already stretched public finances.

Ultimately then, consumers would end up paying through their taxes rather than through their energy bills. The latter, at least, is being open to a degree of self-management and regulation.

So it’s because of all this that there’s an inescapable and uncomfortable truth - the cost of large infrastructure projects will increasingly have to be met through the public purse.

Gone are the days of private companies building national scale projects on the balance sheet.

Therefore, the biggest challenge lies in communicating to end users that the cost of electricity has essentially been subsidised for the long term. For the future.

After all, it’s imperative that consumers begin to recognise that security of supply, low carbon generation and a 21st Century National Grid are costs worth paying for.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.