UK Energy Policy to increase CO2 and consumer costs

Energy Secretary Amber Rudd’s admission in November that the UK does not have the right climate adaptation policies to meet its renewable energy targets was no surprise to the energy and environmental planning sectors.  The Energy Secretary admitted to the Commons Energy and Climate Change Committee that the UK does not have policies in place to meet its EU target of delivering 15% of energy from renewable sources by 2020.  Unless it can deliver on these targets, the UK could end up having to buy renewable energy from its European neighbours and, if the gap is not plugged, could be subject to legal action and heavy fines from the EU.

The thrust of DECC policy responds to the Government’s belief that renewable energy subsidies had become over-generous and that changes, made over the summer of 2015, were needed to keep energy bills down.  This approach overturns a decade of consensual energy policy that sought to address issues across the board rather than from a purely cost standpoint.

DECC has made no secret that reductions in support for onshore wind and solar deployment are focused on Treasury profit and loss, rather than on balanced accounting of cost and climate change issues. Whilst previous policy sought to find equilibrium between keeping the lights on, bills low and emissions down, net cost is now the driver to new policy.

What was not anticipated, however, was that the energy policy changes since May 2015 are likely to lead to an increase in CO2 emissions, but without the anticipated reductions in consumer bills.  This unwelcome news was exposed by a recent BBC study which found that, on balance, Government policy changes will result in little or no reduction in household bills, but in a widespread increase in CO2.

The BBC audit also observed that whilst some policy changes will save consumers money, others will actually increase bills. Changes in vehicle excise duty makes motoring more expensive for drivers of small clean cars, and the decision to withdraw support for onshore wind and solar power has arrested market growth of two of the UK’s cheapest sources of clean energy, and driven energy investors away from the UK to find more equitable markets. A survey by the Solar Trades Association found that, by the end of November 2015, 1,800 jobs had been lost in smaller firms across the UK due to proposed cuts to the Feed in Tariff.

Cost vs Climate Change

The UK’s policy focus on low cost over climate change has drawn criticism from the UN’s chief environment scientist. In the weeks leading up to COP 21, Professor Jacquie McGlade said the UK was shifting away from clean energy just as the rest of the world embraces it.  The UK’s cuts in renewables subsidies, coupled with tax breaks for oil and gas, sent the worrying signal to others that the UK appears to have abandoned its leadership on climate change, while 150 other nations make unprecedented pledges to shift towards clean energy. It is unusual for a senior UN official to criticise the policies of a leading member state in such forthright terms. 

Another report, commissioned by the independent government advisory Committee on Climate Change (CCC), scrutinised the decision to withdraw financial support for onshore wind which, at £80/MWh, is one of the most cost-effective forms of clean energy. Highlighting that cost-effectiveness, the CCC noted that onshore wind should be considered subsidy free from around 2020, which matches the cost of new gas. The report also shows that the cost of offshore wind energy will drop dramatically by the end of the decade, with further significant cost reductions in the 2020s.

The current generation of renewable energy technologies is just one part of the potential future energy mix. They are close to cost parity with traditional sources and offer an important breathing space and technological stepping stone to support growth of new models of economic development, of particular importance to developing nations, that safeguard the global environment.

The Good News…..

Hot of the press from this week in Paris: ‘COP21: Carbon emissions ‘to stall or even decline’ this year’ (BBC News 7 December) seems to be a major ‘good news’ story.   The journal Nature Climate Change reported to the COP that emissions of carbon dioxide from fossil fuels and industry are likely to have fallen 0.6% in 2015. Since 2000, global emissions have grown annually by 2-3%. Significantly, the slowdown has occurred while the global economy has continued to grow by 3% in both 2014 and 2015.

The drop in emissions is largely attributed to restructuring of the Chinese economy which has driven decreased use of coal and increased deployment of renewables. The rapid growth of global renewables investment has also contributed to the trend.

There is a ‘but’ however.

Emerging economies are heavily dependent on coal.  It has taken China some 20 years to achieve the current level of efficiency.  As other nations develop along similar emissions trajectories, the industrial nations, where emissions are going down, need to deliver a much faster decrease in CO2 emissions to offset peaking of emissions in the developing countries over the coming decades.

Against this backdrop, the UK government has a responsibility to pull its weight, immediately and in the international context.  Investment in nuclear power and the transition to new gas are both relatively youthful markets and cannot fill the widening gap in UK energy demand in the short term. Let’s hope that whilst the Government is busy redressing the domestic balance sheet, the far more compelling issues around Climate Change do not escalate beyond our ability to adapt.

As spotted on a banner in Paris this week… ‘If the planet was a bank she would already have been saved.’…