Why a low carbon transition can’t be brought about by stealth
When Clement Atlee was asked how Churchill won the war he said ‘talking about it’. He imbued confidence in a nation by laying out a narrative and making it stick through repetition and reinforcement. In contrast the Coalition government is attempting to deliver the biggest transformation of our energy system since the Victorian age by talking about it as little as possible.
The prime minister had the opportunity to give his first keynote speech on low carbon to the world’s energy ministers gathered in London last month, and decided not to. This is part of a pattern of private enthusiasm and public reticence from senior ministers.
This stealth strategy is driven in large part by a desire to avoid conflict with a small number of vocal low carbon sceptics in the media and parliament. So, two years into a massive reform of the electricity market, the government remains vague about how low carbon the power sector will have to be, and four months from the launch of the Green Deal there is no public communications plan for a programme which has to stimulate millions of individual households into upgrading the energy efficiency of their homes.
Silence won’t work
The last few months have demonstrated why this approach won’t work. The most obvious failure is that it hasn’t stopped insurgency campaigns by the Daily Telegraph and the Daily Mail, who now regularly broadcast spoiler stories, trying to pin the blame for rising energy costs on low carbon, irrespective of the fact that high gas prices are the main culprit.
A bigger threat is that lack of public leadership is resulting in the slow erosion of support for the government’s low carbon reform agenda from its natural allies in the business and NGO communities. This is particularly noticeable on electricity market reform (EMR), where a bold plan to de-risk low carbon power supply, which began with widespread support, is now in choppy waters as different technology sectors start to question its benefits. Independent renewable developers have been the first out of the blocks, calling the plans unworkable, but the carbon capture and storage sector also has real concerns that it will not support the commercialisation of carbon abatement.
However, the biggest problem is that investors are rattled by the mixed messages coming from government. As one potential energy investor asked “Should I believe the climate secretary or the chancellor?” There is now a danger that the criticisms voiced by the chancellor of the low carbon transition will become self-fulfilling. Every time he questions the affordability of the UK’s green commitments, the cost of capital rises for low carbon infrastructure as investors require a higher risk premium.
The gas hiatus
At the heart of the government’s ambivalence about communicating its low carbon ambition is also a persistent belief that there may be a much cheaper, high gas route to secure energy. But this is a fallacy, and an example of politicians being too busy to update their working assumptions about energy.
Gas used to be cheap, but its price has remained stubbornly high right through the economic downturn. It is likely to keep on rising when global demand rebounds, and shale gas is unlikely to reverse this trend. Nevertheless, the government is acting as though it can decarbonise the UK economy cost-effectively whilst encouraging unabated gas power stations to be built in large quantities. This won’t work because the pathway to cheap low carbon energy relies on business believing they should invest now to bring down the cost of a low carbon power sector by 2030. So investor confidence in low carbon is undermined by government’s attempts to maximise its flexibility on gas. Indeed, it risks producing a long term hiatus in investment in all forms of generation by pretending there is no trade- off between political flexibility and investor certainty.
Fulfilling low carbon plans
Hidden in the depths of the Treasury’s website is an infrastructure pipeline spreadsheet which lists hundreds of UK projects it wants to get off the ground, and the striking thing is that the vast majority are low or zero carbon projects. Perhaps the chancellor could focus his department on unblocking these investments rather than concentrating on the small minority made up of roads and gas power stations.
The UK also has an impressive array of new delivery mechanisms lined up to support the green makeover of our homes, from the Renewable Heat Incentive and smart meters to the Green Deal, but it has no way of joining these initiatives up. As a recent business-backed report from Green Alliance suggested, the government could ask private sector providers of these services to club together and create a new energy efficiency super brand designed to engage consumers in the makeover of their homes.
Electricity market reform is a more complex challenge, but, to rebuild confidence in the process, the government should adopt the Committee on Climate Change ’s advice and set out a clear and quantifiable carbon objective for the new arrangements. This will not resolve the contractual problems raised by the renewables industry but it will create a common goal for all power technologies, avoid locking the UK into high gas dependency, and should help get a better outcome from the tortuous EMR negotiations with Treasury.
Talk about it
The UK has a good story to tell on low carbon. We are investing billions in modernising our energy system and we have a cleantech business sector which is still growing fast, despite the downturn. Nevertheless , business confidence is low and will remain so until the Coalition finds a way of talking coherently about its ambitions for the low carbon transition. The government doesn’t have to commit more public expenditure in the short term, and it doesn’t have to change its fiscal position. But it does have to put its mouth where its money is.