Rob Lyons: How Green Politicking Will Deepen Fuel Poverty

  • Date: 14/07/11

The ‘dithering’ is over, declared UK energy secretary Chris Huhne. After years of handwringing and indecision, Britain has an energy policy – and it is perhaps surprisingly pro-nuclear. However, in its efforts to promote low-carbon energy, the policy promises a continuation of rising fuel bills, which will make life harder both for companies and householders.

The past couple of decades have been relatively easy for UK energy planners. Most of our electricity has come from coal, gas and nuclear power. Energy has been fairly cheap. By shifting the balance from coal towards gas, greenhouse gas emissions have gone down quite a bit, which looks good when lecturing other countries. But global warming fears and the need to replace those ageing nuclear power stations have meant that politicians have had to get round to making some tricky decisions, something that the modern, principle-lite politician isn’t really cut out for.

Slowly but surely, ministers have come to the realisation that renewables simply can’t replace fossil fuels or nuclear power except as a small proportion of the mix of energy we use. Wind and solar are intermittent and unreliable. We can get power from them, but it is relatively expensive and must always be backed up by other, more reliable, sources of energy.

So, for example, in the first quarter of 2011, UK electricity supplies broke down as follows (according to statistics from the Department of Energy and Climate Change):

Gas – 38.2 per cent
Coal – 34 per cent
Nuclear – 17.9 per cent
Renewables – 8.1 per cent

It should be noted that the ‘renewables’ category includes things like landfill gas (from rotting rubbish), ‘biomass’ (which includes such mad ideas such as power stations importing timber to burn), and old hydropower stations. There isn’t much more where that came from. Wind, which would be the main source of renewable energy in the future in the UK, still only meets a small proportion of British energy needs, even if it is growing quite quickly.

Power from renewable sources in the UK since 2000 (source DECC)

But the problem is compounded because these figures only reflect electricity production. To meet the vision of a far-off, carbon-neutral future, the fuel for transport – currently almost entirely from oil – and the heating of our homes and hot water, much of it done by gas, will need to be replaced by electricity from low-carbon sources. But renewables currently only produce 3.3 per cent of Britain’s total energy needs. No wonder some high-profile erstwhile anti-nuclear campaigners have become converts to the idea of new nuclear power stations as an alternative to burning more and more coal: renewables just aren’t up to the job and won’t be for a long time.

Developments in technology may eventually make renewables much more viable. But for now, if we want reliable power at a reasonable price, we need such old favourites as gas and nuclear.

What does the energy White Paper propose, then? Basically, the government wants to create a framework so that energy companies can build nuclear-power stations and windfarms with confidence, knowing that they can rely on a certain price for that power. To that end there will be a ‘feed-in’ tariff that will guarantee a certain minimum price for nuclear and wind power. But wind power will still need back-up, so the plan also allows for incentives – a ‘capacity mechanism’ – to build new gas-powered stations that will cut in when conditions are not windy or when demand surges.

On the other side, the White Paper also proposes new emissions standards that will make building coal-fired power stations impossible unless they are fitted with a mechanism for carbon capture and storage (CCS).  So that rules out pretty much the cheapest source of power until such time as an unproven technology becomes commercially viable. Existing gas and coal generation will also be made more expensive by creating a ‘floor price’ that will have to be paid for every unit of carbon emitted.

Nuclear power companies gave the proposals the thumbs up. Vincent de Rivaz, chief executive of EDF Energy, the UK subsidiary of the French energy giant EDF, told the Financial Times: ‘This package is going to deliver for the future the right balance between what the investors want and what the customers need… We need to rebuild Britain’s energy infrastructure. We need to do it and we all know it will have a cost. The White Paper is designed to keep that at a minimum.’

Others were lukewarm, with supporters of wind energy concerned that the particular form of feed-in tariff would help nuclear more than it would help wind. However, Huhne – once apparently a staunch opponent of nuclear – rejected the alternatives on the grounds of price.

What is absolutely crystal clear is that energy in the UK is getting more expensive and it will continue to get more expensive in the future. These new policies will only be one factor in those rising prices. Demand for energy is rising both in Britain and worldwide. As Michael Pollitt notes in the Guardian, past UK policy has focused on delivering low prices (which may surprise those facing eye-watering energy bills now). With the emphasis on delivering the new generating capacity – at an estimated cost of £110 billion over the next few years – the pressure will be off on squeezing prices.

But the decision to favour low-carbon technologies will exacerbate the problem; the cost of all those feed-in tariffs will have to be passed on to businesses and consumers. By promoting wind, for example, and thereby having to build gas-fired power stations to provide back-up, two lots of generating capacity have to be built. As critics like Matt Ridley have pointed out, much of the emission-reduction benefits could have been achieved at a lower price by simply building the gas-powered stations alone and promoting the development of shale gas resources (see Shale gas: a welcome ‘energy shock’). Energy-intensive businesses will have a greater incentive to relocate to areas where power is cheap and commitments to reducing emissions are non-existent.

Rather than trying to force through renewables technology that isn’t competitive yet, it would be better for the government to support further research and development while continuing to encourage a broad mix of different energy sources – including coal. The world isn’t burning up, there’s no need to panic – particularly when much bigger countries than Britain will carry on burning massive quantities of cheap coal for decades to come. At least the White Paper has finally put forward a serious policy to support new nuclear power after years of technophobia in the corridors of power.

Setting out a low-carbon policy in the UK will have next to zero effect on climate change, whatever the effect of manmade greenhouse gas emissions will be. It will make UK business less competitive and it will push more people into fuel poverty. It may even cost jobs if some firms quit Britain altogether. But never mind, eh? At least British politicians will be setting a ‘moral lead’ on climate change to the rest of the world.

Rob Lyons is deputy editor of spiked. His book, Panic on a Plate: How Society Developed an Eating Disorder, will be published in October. (Order this book from Amazon (UK). Read his bloghere.

Spiked Online, 14 July 2011

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