Where next for energy policy?

This post is by Matthew Spencer, director of Green Alliance.

Anyone reading the media coverage of the Energy Bill announcement last Friday will be left wondering who really won and what will happen next to energy policy. There were some clear winners but they weren’t on either side of the Coalition divide on decarbonisation, which means that the future direction of energy policy remains very uncertain.

The lack of agreement on decarbonisation raises the risk for the first time that climate change could become a dividing line between the political parties at the next election.

The winners and losers
The clear winners in the short term were the renewable development industry and the two CCS demonstration plants, which should now have sufficient levy support to drive a new wave of construction.  We are now likely to see a dash for offshore wind as ’round  three’ projects race to reach financial close before 2020.

The losers are renewable energy suppliers seeking to invest in UK manufacturing. The 2020 cliff, beyond which there is no certainty of support for low carbon power supply, means that the nine engineering businesses seeking to build offshore wind assembly plants in the UK will either have to build on the basis of orders from the short term offshore dash, or wait until an EU or UK framework emerges to give them some confidence that the market will continue to grow beyond 2020.

The other loser is therefore UK industrial policy, which has just been holed below the waterline by the decision not to set a 2030 decarbonisation target. We are embarking on the biggest modernisation of our energy system in decades with very few tools left to make sure it  directly benefits UK industry. According to BVG Consultants, the next wave of offshore wind could have 50-60 per cent UK content  with the help of UK turbine factories. In contrast, some existing projects, being built without the benefit of UK turbine manufacturers, appear to have as low as ten per cent UK content.

The media have tried and failed to write a convincing story of political winners and losers, because it was a score-draw, with Davey delivering a strong Levy Control Framework and Osborne blocking unprecedented levels of support for a decarbonisation target. As a result the polarised politics of the Energy Bill have not gone away, they will be decided by what sceptics and advocates of decarbonisation do next.

What the sceptics want
Sceptics will hope that the lack of a decarbonisation target and new capacity payments will lock in a gas trajectory.   However, despite received wisdom, this is unlikely to happen, because the fourth carbon budget means gas faces even more uncertainty post 2020 than renewables. The sceptics will therefore want the Conservative Party to go into the next election with a commitment to unwind decarbonisation and the Climate Change Act. To make that more likely they will continue to beat the drum of the costs of renewable energy. They will continue to conflate short term price increases caused by gas with the medium term costs of low carbon supply, and tap into widespread consumer distress about energy prices

Time to shift focus away from the target
Decarb advocates therefore have a dilemma. Do they keep driving for longer term certainty that will increase UK content and lower costs in the long run, or do they shift focus on the near term battle for public sentiment on energy bills?  Put it another way, do they keep pushing for stronger policy or switch to countering the threat to the UK public consensus on climate change action? It will be tempting to do the first, because it’s a targets and direction frame which has policy logic, but they should do the second because energy policy will be determined by this contest for hearts and minds.

It’s time to change strategy, and organise around a bold and tangible programme to help hard pressed consumers reduce their energy consumption and the impact of rising prices. The Energy Bill Revolution is an example of a broad based campaign which attempts to do this by pushing for new finance for energy saving, but it needs to be complimented with more immediate ways of helping the hardest pressed consumers and businesses.

It’s  time NGOs and business came together to offer direct energy saving services to their members and customers, at the same time as identifying the wider support needed for a bold UK  retrofit programme. This is much more likely to protect political backing for decarbonisation than another battle over the direction of energy policy. It also has the benefit of not exacerbating the message that UK energy policy is up for grabs, which is in danger of becoming a self-fulfilling prophesy.


About Green Alliance blog

Green Alliance is a charity and independent think tank focused on ambitious leadership and increased political support for environmental solutions in the UK. This blog provides space for commentary and analysis around environmental politics and policy issues as they affect the UK. The views of external contributors do not necessarily represent those of Green Alliance.
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3 Responses to Where next for energy policy?

  1. A. Alexander says:

    Regarding ‘Retrofit’, this is a phrase we could do with dumping. The view that industrial processes require retrofitting inherently suggests re-engineering or end-of-pipe pollution abatement that adds cost at no addition of value. Instead, redesigning industrial systems to meet green criteria is occurring in line with the natural replacement cycle of factory plant, or with new operations from new firms or expanding ones. Do you suggest a need for a policy intervention to increas this rate of change? We haven’t heard much about the CRC energy efficiency programme recently but this is what this sought to do.
    In building operations again the term refurbishment is more appropriate than retrofit. Lowering energy can come from insulation, improved services etc. Various firms also provide the cost modelling and facilities management approach to carbon reduction in large real estate portfolios. The CRC becoming mandatory in the public sector has put these organisations at the forefront of successful energy reduction – and fundamental strategic challenges between energy efficiency and expansion of operations.
    When it comes to households, it really should just be a case of pushing the classic messages on insulation. Social housing under the Decent Homes programme belatedly sought practical intervention for thermal efficiency. But we’ve been somewhat distracted by the Green Deal. What is the real progress on energy reduction in housing? I imagine the news might be generally positive if we could bring all the relevant government reports and academic papers on these topics together in a digestible format.
    The energy bill and it’s role in supporting major infrastructure investment has dominated debate over recent weeks. Your comments on industrial strategy are very interesting. Look forward to more discussion on this (but please don’t lump it all together as ‘retrofit’)

  2. Tommy Boyde says:

    Over the past two years, there has been mounting medical and scientific evidence of the grave biological dangers to humans from so-called “Smart” Meters exposure that are being installed by the hundreds of thousands all over North America and Europe. Scientists have been documenting the EMF/RF exposure effects for decades.
    However, it is only in the last two years, with the constant wireless electromagnetic radiation exposure to these new meters, that other medical evidence (down to the cellular level) has been reported.
    In the US, there has never been a mandate to force these utility meters on millions of unsuspecting people.
    There has been no Precautionary Principle used, while corporate greed has abounded.
    Various utility companies have not told their customers of the dangers.
    What they told their customers about these new meters was that it would “update the grid” and help them control individual usage. Customers have not been told about the serious health problems that these RF pulsing meters cause.
    Despite this evidence of health issues, Ed Davey wants to “roll out nationwide” Smart Meters.
    Are we reaching the point where corporate greed, illustrated admirably by the dangers posed by mobile phone usage now being ignored because to address those dangers would destroy the cell phone market overnight, is now proliferating the renewable energy agenda?

  3. Pingback: The Independent View: Cross-party amendment to decarbonise power by 2030 needed to stop Osborne

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