Targets are considered an affront to rational thinking, a source of extra cost and an unnecessary constraint, binding the government’s hands on energy policy.
This thinking has led to a UK government crusade against an EU 2030 renewables target, with the Lib Dems and the Conservatives finding a common cause in their campaign against German and French support for the target. The group-think behind this antipathy has blinded some very bright people to the pragmatic case for a renewable energy target.
The 2020 target transformed the market
The current EU 2020 target was forged by Tony Blair and Angela Merkel in 2007. It has had a transformative effect, resulting in the world’s largest single market for sustainable energy, it has driven down technology costs and resulted in a much overdue acceleration of renewables generation in the UK.
It has come at a cost, as with any policy designed to commercialise an immature market, but the cost has been dwarfed by the overall rise in energy costs. So far, it has only added around £20 to the average household electricity bill since 2004; whereas bills have increased by over £500 overall, primarily due to a rise in international gas prices.
Carbon pricing’s major drawback
However, the fundamental objection to a renewable energy target is not the absolute cost but its perceived economic inefficiency relative to other policy instruments for achieving decarbonisation. Opponents believe that we could have achieved the same impact on energy markets and carbon emissions for less cost. The argument is that carbon pricing through emissions trading would do this, producing coal to gas switching in power generation and more efficient use of power. A trajectory of every increasing carbon prices would result in businesses investing their shareholders’ money in renewable energy technology research. This would bring down the cost, relative to increasingly expensive fossil fuels, making it competitive.
The great appeal of this idea is its simplicity. It avoids the need for the state to make judgements about the affordability of different technologies, or to make any decision about the desirability of different fossil fuels. It allows government to reach its goals on autopilot. The drawback is that it has been tried and it doesn’t work.
The history of the EU emissions trading scheme is one of great intentions dashed by a lack of political support, and prices so low that they have no measurable impact on energy decisions. Its proponents can point to mitigating factors but, for the foreseeable future, it offers no prospect of transforming our energy system.
No new constraints on UK power decarbonisation
The second argument against a renewable target is based on autonomy: that the UK government needs the freedom to make its own judgements on the most cost effective ways of achieving decarbonisation goals. These judgements can be made on the basis of price, influencing the allocation of low carbon contracts, so the cheapest gets the biggest share.
This is a stronger argument, until you examine the numbers being proposed for an EU target. Green Alliance’s research shows that it imposes no new constraints on the UK’s power decarbonisation trajectory, which two of the UK’s three main political parties are committed to.
The numbers being discussed by the EU for renewables are between 24 and 27 per cent of European energy. This is a small increase on the level the UK will achieve by 2020; and it is below the levels of renewables needed, even if its competitors from nuclear power or carbon capture and storage take the lion’s share.
Our analysis published today, with Christian Aid, Greenpeace, RSPB and WWF, shows that, even if the EU agreed a higher level of 30 per cent, it would translate into a UK electricity target of around 40 per cent. This is a lower contribution than all the 2030 power decarbonisation routes suggested by the Committee on Climate Change, including its ‘ambitious nuclear’ scenario.
The target as a floor, not a ceiling
The EU 2030 renewables target is, therefore, best thought of as a floor for UK renewables sector, rather than a ceiling, given that uptake could be very much higher if prices continue to come down. It also means that an EU renewables target need not impose additional cost on the UK consumer, as it is a fraction of the £20 per year estimated additional household cost to achieve a 50g CO2/kwh decarbonisation target.
The argument for and against the 2030 renewables target is driven by fear. Fear from Whitehall of being pinned down. Fear from the renewables sector of being locked out of low carbon markets by resurgent nuclear power. The first fear is unfounded if you support decarbonisation of the power sector, and it is marginal even if you don’t. The second is unproven, but understandable given the ‘first amongst equals’ status given to nuclear power by both the coalition and the previous Labour government.
Benefits to the UK are a strong reason to support the target
The past few months have convinced us that there is a strong UK case for an EU renewable energy target. It’s a simple way of providing a minimum level of investor confidence beyond 2020. As a result, it can increase investment in long run assets such as turbine factories, allow the UK to secure new renewable energy manufacturing jobs and avoid importing as much equipment from competitors. It will increase regional European co-operation on the North Sea grid, where interconnectors take many years to plan and deliver.
So, at no additional cost, the UK can be part of a much bigger effort to grow the renewables sector and get direct benefit. Whitehall should drop its prejudice and end its self defeating campaign against a target.