05. 09. 2014

Pity the Prime Minister in his Energy Confusion

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I’m always rather heartened by the fact that the Prime Minister takes his holidays in Cornwall – for the simple reason that at least once a year he gets to see wind turbines in action, happily churning around (as they do most of the time in Cornwall) without so much as UKIP zealot to be seen for miles around.

But I wish these holidays would simultaneously stiffen his somewhat flaccid sinews in terms of sorting out the mess that is this country’s energy policy. Not just on wind, and other renewables, but on nuclear, fracked gas, energy efficiency, prices, regulation etc etc etc.

Back in July, I was one of the 150 ‘solar champions’ who wrote to the Prime Minister in support of an appeal to him from the Solar Trade Association to stop disadvantaging this country’s amazingly resilient solar industry. We heard back from him in the middle of August, with as non-committal and mealy-mouthed a reply as it’s possible for a civil servant to draft. Buried in that reply, however, is what I can only describe as a sick joke. Having pointed out that “Large-scale solar PV, under the Renewables Obligation, is deploying much faster than previously expected”, he goes on to say that this can’t be allowed to go on because “it is essential that we maintain strict control over the impact on consumer bills.” This from a Prime Minister who has personally authorised the allocation of inconceivably vast sums of public money to build the most expensive power stations in the world in the shape of two nuclear reactors at Hinkley Point in Somerset.

By one of those lovely ironies, his letter arrived on the very same day that the Fraunhofer Institute in Germany published a new report showing that Germany generated 31% of its electricity from renewable energy sources throughout the first six months of 2014. Yes, that’s right: thirty-one per cent, over a six-month period. The country’s solar power plants increased total production by 28%, and wind by 19%, compared with the same period in 2013. Consumption of coal was down 4%; nuclear down 2%; and natural gas down a whopping 25% - at precisely the time that Germany is doing whatever it can to reduce its dependence on Russian gas.

Why does Cameron not receive this kind of critical information? I know he still thinks of solar and wind as ‘niche’ interests, and believes that the only way to ‘keep the lights on’ is to frack the hell out of the UK countryside and hurl billions of pounds at EDF so they can screw up yet again (they always screw up) at Hinkley Point. Meanwhile, as Germany so powerfully demonstrates, if you just keep on consistently ramping up investment in wind, solar and biomass (all of which get cheaper every year, and require less and less government support as a result), you get greater energy security, lower greenhouse gas emissions, and (in due course) an excellent deal for the consumer.

That last point remains crucial. Everyone in the renewable energy world acknowledges just how important it is to ensure cost-effectiveness in any support scheme, and wholeheartedly supports the Government’s desire to do just that. If only that was what was actually happening.

From October, the new ‘Contracts for Difference’ will replace the outgoing Renewables Obligation. From that point on, renewable energy projects will need to compete for an annual budget of around £200 million a year. So far, so good, but that’s when things start to go wrong.

The Contracts for Difference will be split into three ‘pots’: the first for more established technologies like onshore wind and solar (which gets around £50 million); one for less established technologies like offshore wind (which gets around £155 million); and one for biomass (which gets nothing at all to start with!) This is crazy. £50,000,000 a year for hydro, onshore wind, landfill gas, energy from waste and large-scale solar is simply pathetic – and pretty much guarantees that the large-scale solar market here in the UK will collapse.

As Leonie Greene of the Solar Trade Association said at the time:
“This is an absurd decision that will ultimately hit energy bill payers across Britain. Solar is already cheaper than offshore wind; it will soon be cheaper than onshore wind, and it stands a realistic chance of being cheaper than gas by the end of the decade. But this is only achievable with stable government support and a level playing field. Today’s decision shows the government is stacking the deck against solar, the most popular form of local energy, by starving the industry of resources. The sheer complexity of the new Contracts for Difference mechanism disadvantages small and medium-size solar businesses who are entering a game of three-dimensional chess against multi-national utilities.”
Solar Trade Association press release 24 July 2014, “CfD shows Government is stacking deck against solar” (pdf).

So here’s the question: If the government is so keen on cost-effectiveness, why aren’t nuclear energy companies being required to compete in the same game? Why are they not required to put in their bids against solar, wind, biomass, other renewables and energy from waste? Even against Carbon Capture and Storage.

Anyone reading my blog regularly knows the answer even as you read the question: Because the entire system has been rigged to ensure that only the highest-cost nuclear producers get a guaranteed, pretty much unlimited subsidy for decades, right royally screwing the consumer all the way down the line.

We’ll hear soon whether the EU Commission has approved this nuclear bonanza under its State Aid rules. If logic and consistency alone were the principal criteria for determining such a decision, there’s simply no way the Hinkley Point deal complies with those rules. But there’s politics in there too – and God knows what dirty deals are being discussed to avoid another massive stand-off between the EU and the UK Government.

Even if approval is granted, that still doesn’t mean Hinkley Point will get built. Investors have still got this one marked down as a real turkey – and an already putrefying turkey at that. And even the Chinese may decide that they’d better hang on to the money they’d initially earmarked for Hinkley Point now that their own domestic nuclear programme is running into real difficulties.

And even if the investors / Chinese do stump up the cash, it will take at least a decade to get the bloody things built. During which time, thousands of brilliant, reliable, cost-effective renewable energy schemes will go begging.

And the same could so easily happen with Cameron’s madcap fracking fantasy. However obsessively he drives this forward, prepared to re-write every law in the land to help make it happen, it may well not happen if the protests keep on building (which they will), and if Local Authorities around the land follow the example of West Sussex County Council, which unanimously turned down an application to drill for gas just outside the South Downs National Park back in July.

Years of attritional confrontation will follow, during which time, thousands of brilliant, reliable, cost-effective renewable energy schemes will go begging.

Get the picture? The contrast with Germany couldn’t be more tragic. And pretty soon it won’t just be Germany we’ll be comparing ourselves with. Just a few days ago, the International Energy Agency issued its annual report on the state of renewables globally. In 2013, another $250 billion was invested in renewables – which are now responsible for a mighty 22% of total world electricity.

Come, on, David. See those wind turbines for what they really are next time you’re down in Cornwall. It’s nuclear that’s the niche, not renewables.

PS As it happens, we also take our family holiday in Cornwall every year, renting a cottage that is just 100 yards from one of the county’s most successful windfarms. This is the view from our sitting-room window. Love it!
 

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