The UK needs a low carbon and clean energy package that adds up for investors, writes Mark Kenber, chief executive of The Climate Group
Winter is a traditional time of year; alongside relentless Christmas advertising, there are a number of less festive traditions we have to endure. Energy companies will tell us that prices are rising, analysts will warn of falling supplies and the government will announce that it is devising a new energy policy framework.
But discussions need to focus on long-term strategies and the rapid scaling up of renewable energy resources. We know that the resources exist; the Department of Energy and Climate Change (DECC) estimates that 35 per cent of Europe’s total wave resource is situated off our coast, while wind alone could provide close to a quarter of UK electricity needs by 2020.
The political elite also appear to be supportive; Scotland’s devolved government is actively supporting investment in marine energy, and this summer announced £7.9 million in funding to test new wave and tidal prototypes in its seas, for example.
The government’s own survey showed that more than three-quarters of the UK population want electricity from renewable sources. RenewableUK points out that the wind energy industry has already created almost 12,000 jobs and is expected to employ up to 90,000 people by 2020. As a newer industry, the potential in the marine sector is smaller, but nevertheless still valuable; 800 people work full-time in the sector and by 2035 this is projected to reach 19,500.
We need “investment grade” policy: a low carbon and clean energy package that adds up for investors
To grow and sustain these employment figures, the UK must compete against countries in the developed and developing world to attract corporate investors. We need “investment grade” policy: a low carbon and clean energy package that adds up for investors – straightforward, robust and designed for the long term, backed by supportive planning regulations among other elements, and where the details matter. Stability also requires that it is free from political interference and unpredictable changes.
We still seem to be far from this ideal. At the macro level, the debate over Electricity Market Reform seems to be moving in the direction of less rather than greater certainty. Reports of conflicts between the DECC and the Treasury, the opaque nature of policy and planning laws, and the recent remarks by Environment Secretary Owen Paterson that subsidies risk us becoming a “Soviet style system”, will not allay the fears of potential investors, who can take their capital to more receptive economies.
There are some simple steps the government can take to encourage investment:
- Reaffirm that energy policy will be guided by the carbon budgets established by the Climate Change Committee and that energy planning should be subject to this;
- Likewise reaffirm that the UK will meet its 20 per cent EU renewable energy obligation – meaning around 30 per cent of electricity generated from renewables by 2020 alongside the longer-term commitment of decarbonising the power sector by 2030 or soon thereafter;
- Commit to driving investment in the infrastructure and storage facilities needed to ensure that renewables can access the grid efficiently and effectively.
And finally, what everyone – from consumers trying to decide which tariff to use, to power producers and energy investors – wants is simplicity. In any walk of life, complexity adds risk and cost, and this is true with the long-term investments required in the energy sector. A simple and clear market structure, backed by long-term policy, is surely not an impossible dream.
Mark Kenber is an expert on climate policy and has directed groundbreaking projects with the international finance, energy, technology and aviation sectors; a former adviser to Labour Prime Minister Tony Blair, he co-founded the Verified Carbon Standard.