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UK energy is policy in chaos

This week the Government is expected to publish its new Energy Bill, which will pave the way for the much heralded (and derided) Energy Market Reform. However, it appears that UK energy policy is currently in its least consistent and weakest state in 20 years.

The last couple of weeks have featured so many negative stories on UK energy policy that it’s hard to know where to begin. So, in no particular order, here are the things that the Government urgently needs to address to keep the lights on (before we even begin to worry about energy costs, energy security and climate change)…

The Green Deal

Firstly, there are concerns about the flagship policy of ‘The Greenest Government ever’ [feel free to laugh at this, everyone else does now!], the Green Deal. There are real concerns that without better awareness, this, and other energy saving policies are set to fail. The Green Deal is possibly one of the most mis-understood policies this Government has come up with (I don’t understand it), as witnessed by comments from Which? last week that warned: ‘that the savings on energy bills, promised to consumers, may fail to materialise.’

In response, a DECC spokesperson said, “The Green Deal will let householders pay for home improvements like insulation through savings on their energy bills, reducing the amount of gas and electricity and keeping heating bills down. The concerns raised by Which? demonstrate a misunderstanding of the proposals. Minsters are happy to discuss these issues with Which? but have yet to receive a request for a meeting. Protecting consumers is a priority as we develop Green Deal policy. From the very start the Green Deal will be governed by the highest standards to make sure customers can trust what they are getting.”

That’s the point. If Which? has ‘a misunderstanding of the proposals’, then what hope is there for us mere mortals: homeowners, landlords and tennants?

Perhaps that’s why the BBC and The Guardian reported last week that ‘the Cabinet Office interviewed critics of the scheme and reported their concerns to the Prime Minister, Deputy Prime Minister and Energy Secretary.’ However, the reports drew a swift reponse from The Cabinet Office on Twitter. ‘Suggestions that #GreenDeal is under review is not true. Routine to tlak to business in policy development. PM & DPM fully committed,’ is said in a Tweet.

However, as we’ve said before, if the Government wants to stop this incessant drip-drip iof negative stories, then it needs to cut the crap and start delivering.

 

Nuclear Power

Dreams of a new nuclear renaisance are also slipping away from the Government’s grasp. Not only have we had RWE and E.ON pull out of the Horizon consortium, and similar threats by Centria, but there are now signs that EDF’s plans (the only credible ones left in the market) could be under threat following the election of Francois Hollande as French President.

To add to the problems, Charles Hendry has admitted that no-one else is likely to take on the Horizon project. Also, Platts reported that, ‘EU State Aid rules are preventing the UK government from acting as counterparty to new nuclear Contracts for Difference, energy minister Charles Hendry said Tuesday in evidence to the House of Commons Energy and Climate Change Committee.’

All of this means that without major changes, EMR or not, a new generation of UK nuclear power plants is unlikely until the middle of the next decade, about 10 years afgter we need their replacement capacity!

 

Carbon Reduction Commitment (CRC)

This was a pretty controversial policy when it was introduced. Particularly as it was seen as another steath tax against business rather than a genuine attempt to reduce carbon emissions. One example was the way renewable energy generation projects were excluded from the accounting process.

Now, a report on edie says, ‘A Global Action Plan study carried out among 108 organisations affected by the carbon reduction commitment (CRC) indicates this change in policy has had a detrimental impact on encouraging them to save carbon.’

So, that’s another failed energy policy then…

 

Rejection of EU Renewables Targets

Various sources have reported that Ed Davy, the UK Energy Secretary, has told the EU it ‘should focus on cutting carbon emissions, rather than just repeating an existing range of EU green policy targets that expire at the end of the decade’ [Reuters]. “While we think the renewables target for 2020 is a very good target and we believe we are on track to meet it, in terms of another renewables target, we have to think about what we are trying to achieve here,” he said.

The move has been widely viewed by renewable and climate change campaigners as the beginings of campaign to get the EU to allow member states (and therefore the UK) to count nuclear, traded energy and even gas against emission reduction targets. Is this because the Government thinks it won’t meet the current RED tragets by 2020? That’s not what others think

 

Gas policy in crisis

It was only a ferw weeks ago in the budget that the Government told us all that gas had a key role in UK energy policy. Even more recently, two weeks ago in fact, Charles Hendry said ‘the government’s upcoming gas generation strategy — to be launched in the autumn — would clarify the role of gas in light of the “unprecedented challenge” faced by the UK in rebuilding its ageing energy infrastructure’ [Platts].

So, imaging my surprise, and no doubt that of others when this week’s Independent on Sunday announced that, ‘The Government has rejected shale gas technology as a solution to Britain’s energy crisis, conceding it will do little to cut bills or keep the lights on.

‘The Independent on Sunday has learned that industry experts made clear at a meeting attended by senior ministers, including David Cameron and Ed Davey, the Lib Dem energy secretary, that the UK’s reserves were smaller than first thought and could be uneconomical to extract. Now senior coalition figures have agreed that shale gas has the potential to be deeply controversial without securing major benefits in lowering carbon emissions or reducing energy costs.’

Hang on, it was only a month ago that we were told that the ‘UK has vast shale gas reserves‘!

 

Costs of Renewables and Fossil Fuels

On Friday, Edward Davy said the negative impact that spikes in global oil, gas and coal prices have on the UK could be reduced by over 50% in 2050 as a result of climate change policies.

How did the right-wing press report this? They reported on ‘new findings’ by the so-called Renewable Energy Foundation that ‘a study of the Government’s own figures by the Renewable Energy Forum (REF), a specialist renewable energy consultancy, has accused DECC of deliberately misleading the public. REF claims its analysis of the Government’s own figures shows that two-thirds of households, about 17 million in all, will be worse off – even if energy efficiency targets are met in full.’

At the time of writing this post, the 54-pafge report had not been published, but we know from past experience that REF data is biased against renewables and not worth the paper it’s written on…

We won’t bother to slag off the REF here, but if you’re interested, read more at EAEM, and The Guardian

 

All we can do is hope that the Government listen to the likes of William Hague and Damian Carrignton, both of whom have made some quite sensible suggestions ion the last week.

 

To keep up to date with the increasingly complex state of UK energy policy, in weekly, easy to understand chunks, check out Enagri’s BioenergyWeekly newsletter.

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About Enagri

Richard Crowhurst is Managing Director of Enagri Limited, a leading information provider and market analyst working in the fields of bioenergy.
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