Every strategy reaches the point where renewal is necessary. Time erodes what once seemed logical. Technology transforms the range of possibilities. Assumptions turn out to have been false flags. That is the situation now for the UK’s energy policy as spelt out in a report published last week by the economics committee of the UK House of Lords*. The existing strategy flows from the 2008 Climate Change Act, which gave priority to the reduction of carbon emissions. A target of an 80 per cent reduction by 2050 was entrenched in law and, although it has never been clear how it would be enforced, the existence of a legally binding target has shaped decision-making in Whitehall. The goal, to be reached in five-year steps, overrides every other consideration – including cost and security of supply. Rather than allowing the target to be met by open competition to find the least expensive answer, ministers promoted specific technologies irrespective of cost. Commitments to intermittent sources such as wind were taken without regard for their impact on the economics of other businesses, such as gas-fired power generation – which is low cost and relatively low carbon. Some potential solutions, like improving energy efficiency, have been neglected or, as in the case of the so-called Green Deal home energy-saving scheme, laughably ill-designed and ineffective. Investment in research has also been neglected – almost all the recent gains in solar and wind technology have come from the US and China. The figures produced by witnesses to the committee such as Sir Richard Friend, Cavendish Professor of Physics in Cambridge, demonstrate how much UK investment in research has fallen back. Each unintended consequence of the mis-steps has led to more intervention with government transferring detailed decision-making to Whitehall. That has left ministers and officials vulnerable to lobbying by those in search of what Americans would call corporate welfare. Hinkley Point is the most expensive example of this but it is not the only one. The funding of wood chips as a supposedly low-carbon fuel was exposed in a paper from Chatham House published last week. The paper from the Lords is not the last word. There are many more aspects of policy to be re-examined – from the North Sea, which is slipping dangerously towards terminal decline, to the transport system and implications of the prospect of significant electrification over the next two decades. In the retail market there is an unresolved issue of trust. But the report is important because in a very careful and judicious way it demonstrates the extent to which the existing strategy has failed and opens the door to a serious debate on what should come next. *I had the daunting privilege of being an adviser to the committee, which includes senior businessmen and academics, two former chancellors and three former permanent secretaries.
FT 28th Feb 2017 read more »
Letter DB Watson: Last week the House of Lords Economic Affairs Committee published it Price of Power: Reforming the Electricity Market Report. Its findings could be the wake-up call Downing Street needs with respect to the sorry state of the UK electricity industry. Their Lordships are unambiguous and unequivocal in their conclusions, soundbites from which include: “The growth of renewable energy supported by contracts that guarantee a given price for a fixed period has left the UK facing a possible shortage of capacity as investors have not been willing to build new conventional power plants.” Indeed Professor Deiter Helm of Oxford University commented that “capacity margins are effectively nought so the security of supply problem is back with a vengeance”. The report also said “successive governments are perhaps guilty of overlooking security at times” and mentioned “the disincentives for private investment in electricity generation created by the growth of intermittent renewables”.
Herald 28th Feb 2017 read more »
A House of Lords report calling for decarbonisation of the energy system to be relegated in favour of security of affordable supply has been slammed by green industry critics, who have called its conclusions ‘out of touch’ and ‘backward-looking’. The report by the House of Lords Select Committee on Economic Affairs claims the three objectives of UK energy policy – ensuring security of supply while decarbonising at lowest cost – are not complementary in the present day. It argues that generation of electricity from fossil fuels is cheaper than renewable sources and that subsidies provided to clean energy generation have resulted in considerably higher costs for consumers. In response, members of the renewable energy sector have hit back at this claim, with Paul Massara, chief executive of North Star Solar and former CEO of RWE npower, highlighted the ‘out-of-date claims’ in the report. “In reality, renewables like solar or onshore wind are already cost-competitive with fossil fuels in many parts of the world, as costs have plummeted with increasing deployment,” he said. Massara said: “It’s a shame this is a backward-looking report with many out-of-date claims, because elsewhere, the peers make sensible recommendations. Boosting the use of market mechanisms for example, so that all-technologies can compete on a level playing, is a welcome proposal.”
Solar Portal 27th Feb 2017 read more »