The energy secretary’s much-hyped speech was a spectacular display of governmental cognitive dissonance – saying one thing while acting in an entirely contradictory manner. Amber Rudd offered warm words about “a new energy infrastructure, fit for the 21st century”, yet her department ploughs ahead with firing up outdated high-carbon gas power stations set to burn climate changing fossil fuels for decades to come. Shutting coal power stations is a good move – and campaigners should be applauded for their long-running focus on this important goal – but doing so while promising a wave of new gas power stations simply doesn’t go close to ensuring we meet the energy challenges we face. Rudd spoke of competitiveness being at the heart of our energy system, yet her government has committed to subsidising outrageously expensive nuclear power stations while slashing support for solar and wind, which are popular, cheaper and faster to deploy. In these crucial weeks ahead of the Paris climate talks the government is compounding the failure of its shortsighted energy strategy. Never has a greater chance for rethinking the way we power our communities been presented to us – yet Rudd and her colleagues look set to squander this unique opportunity by hiding behind hot air and spin while failing to take the urgent action needed to tackle climate change.

They are young, affluent and shop at online supermarket Ocado. Energy consumers are flocking to independent utility companies such as Ovo Energy and First Utility in the past few years as they become increasingly dissatisfied with the “big six” energy groups that dominate the sector. But analysis by the Financial Times suggests that while revenues among the new entrants are rising fast, profits are not. Revenues among the eight biggest independent suppliers have risen almost tenfold in the past five years. But over the same period, profits have slumped from a total of £4m to losses of more than £14m. The decline in profits has been exacerbated in the past 18 months by the slump in the oil price, which has driven down the costs of electricity consumption. Analysts say one reason for the disconnect between profits and revenues may be that customers of the independent providers are more price-sensitive and less loyal than those buying energy from the established players. If prices begin to rise, they are more likely to switch provider. “People who switch supplier are more affluent, but more likely to switch again. They are valuable but they are savvy,” says Edmund Reid, an analyst at the research group Lazarus Partnership. The independent sector has grown in market share from under 1 per cent in 2010 to over 13 per cent today. Amber Rudd, the energy secretary, on Wednesday welcomed that growth. She said: “The big six are losing market share every quarter. Innovative new suppliers, which range from start-ups to local authorities, are demonstrating how competition is working for people.” But she added that competition was not yet doing enough to drive down prices. This year, the UK’s competition authority concluded that “millions of consumers are paying more for their energy than they need to” and outlined a series of measures to encourage customers to switch between suppliers. Falling profits have not stopped the independents from spending significant amounts on marketing to attract new customers. Ovo Energy, the second-biggest independent energy supplier in the UK, with 500,000 customers, generated revenues of £317m in 2014. But spiralling costs saw losses before tax at the company rise from £658,000 between May 2009 and July 2010 to £37m last year. “It could be that some companies are mainly focused on getting customers in with cheap energy deals and then selling them higher-margin services,” says Mr Reid. Stephen Fitzpatrick, Ovo’s chief executive, last month blamed marketing spend, fees, software licensing and higher staff costs for the losses, adding that he could not say when the independent utility would become profitable. Ecotricity has gone through a similar trend. It made £3.8m of pre-tax profit on £36.9m of sales in 2010, but last year made only £911,010 despite revenues having grown to £70.4m. Ian McCaig, chief executive of First Utility, the biggest and one of the most profitable of the independent companies, likens the situation to what happened in the airline industry several years ago. “When the market began to be deregulated, low-cost airlines began popping up all over Europe. But only those that were best able to operate and hedge their costs managed to survive,” Mr McCaig says. He adds: “If we [in our sector] continue to see an environment where there is a lot of pressure I could easily see a scenario that is not dissimilar over the next three to five years.” The figures are not necessarily an immediate problem for these companies, as constant customer acquisition and in some cases injections of cash from private equity backers are helping fund operations. Many independents fund their working capital by taking sizeable sums up front from new customers and paying them back much more slowly if they end up using less electricity than predicted. Ovo last year, for example, was owed £32m by customers and suppliers, but owed £82m to customers. Mark Freshney, an energy investment banker at Credit Suisse, says: “Energy supply can be managed in a working capital positive way, so that the customer pays ahead of when they consume. This is the most important source of companies’ capital.” This means companies can continue to fund expansion before starting to raise prices in an attempt to make a profit from existing customers. But it does leave the independent sector vulnerable to unexpected problems, such as IT failures, which can quickly erode working capital. That is exactly what happened in 2011 to Independent Energy, which was the biggest small supplier at the time but collapsed after its billing system failed. “The biggest risk facing energy suppliers is glitches with billing and other IT systems,” Mr Freshney says. Another risk is that new entrants fail to buy up oil and gas in advance, chancing their luck for cheaper prices on a month-by-month basis, and are then caught out by a sudden commodity price rise. One executive of a large independent company says: “We think some of the newer entrants are charging so little, they cannot be buying electricity in advance. This could trip them up in future.”

The British property industry has welcomed a government review of one of the country’s biggest bugbears in the planning system. According to the Property Federation (BPF) the relook at the Community Infrastructure Levy (CIL), a development tax which is used to fund local infrastructure, is long overdue. The organisation, which is supportive of CIL in principle, has long advocated a review of the tax and says that it has become overly burdensome and inefficient. The BPF says that the review must not be the end of the story. In some cases, the evidence base used for the initial CIL setting is now fully out of date, and not fit for purpose. It is crucial that local authorities are encouraged to regularly review their own charging schedules against market signals and to test them against ‘real life’ projects that reflect market conditions. It pointed out that CIL simply does not work for complex or large scale strategic sites, and a more site specific and targeted approach to infrastructure funding and other contributions must be taken. It also wants to see clarity between CIL and s106. A fundamental premise of CIL was that it would be used to fund a set of identified infrastructure requirements, whilst s106 obligations should relate only to site specific mitigations and affordable housing provision. However, in reality, this has not happened, and there is considerable overlap between the two. This fundamental issue must be addressed and clarity provided in order for CIL charge setting to be at the right level and to make the process work properly. It is also calling for the integration of CIL with local plans. There is a disconnect between the preparation of local plans and the formulation of CIL charging schedules, which local authorities should prepare in tandem, in conformity with the National Planning Policy Framework. It is critical that emphasis is placed on delivery of infrastructure, rather than just revenue collection, it adds. ‘Many of our members cite CIL as one of the biggest bugbears of the planning system, and there are plenty local authorities who would agree. Whilst some would like to see it abolished altogether, we believe that with the right changes, CIL could be a useful tool for ensuring infrastructure delivery on development sites,’ said Melanie Leech, chief executive of the British Property Federation. ‘The creation of this group is a step in the right direction, but it must not stop here. It is crucial that Government take any recommendations on board, and works with both public and private sectors to ensure that the regime really works in the future,’ she explained. ‘CIL was supposed to provide a quicker, fairer and more efficient way of delivering infrastructure to support development and our members have always supported this principle, but we are concerned that in many places it is not working. We look forward to engaging with the review panel to ensure that CIL becomes less of a burden and more beneficial,’ she added.