heat-policy

Despite the headline grabbing stories around cuts to energy subsidies and tax breaks for fossil fuels, is it all doom and gloom for sustainable energy? In this blog I’m going to explain the energy sectors that are actually likely to do quite well out of the Conservative Government and why it may not all be as bad as it seems.

When the Conservatives released their pre-election manifesto, it was fairly light on energy content, they didn’t like onshore wind and they did like nuclear were the main takeaway points[1]. The 2015/16 energy bill is still making its way through the Westminster sausage machine and while it looks like subsidy for onshore wind will be cut, the Lords have attempted to reverse this policy change. As for nuclear, as far as people can see that’s steaming on regardless of all the issues.

Amber Rudd’s so called reset speech had a lot of words but said very little[2]. More gas generation is needed to replace coal, well we knew that already didn’t we? No onshore wind, yep we knew that too (despite the clear foolishness here). Cheaper offshore wind, yep we got that. Cheaper solar, yes that’s what we were expecting. A focus on shale gas – good luck with that one.  More R &D with a focus on ‘small modular reactors’, OK that’s a bit of a curveball. So all in all the speech suggested that energy policy would be more focussed on costs and security rather than carbon which is probably what you’d expect from a Conservative Government.

Skip forward a week and it’s George Osborne’s turn to have a go[3]. Changes to the RO and FiTs to save money off bills and a cheaper energy efficiency programme will apparently save a household £35. Well firstly that’s not very much and secondly it’s not actually a saving, it’s just a reduction in spend compared to what they would have spent if the previous Government’s policies had been continued. And if costs of renewables do come down further (as they should) then actually less money could equate to even higher deployment than we’ve already seen which is what could happen with renewable heat too.

DECC departmental spending is hit by the spending review and there are reports that 200 jobs are going at DECC[4]. This is clearly not good news but far better that the potential destruction of the department and merger with another department which was being mooted.

But one area which actually looks positive is renewable heat which has been repeatedly recognised by Amber Rudd as an important and difficult area.  The leaked letter which mentioned an undershoot on the RED targets specifically talked heat as an area where there could be a cost effective solution to cutting carbon and meeting renewable energy targets[5]. The spending review maintained support for renewable heat in the form of the Renewable Heat Incentive albeit with some reductions in spend; this was at a time when certainly everybody I spoke to  thought that it was game over for the RHI. However, as tariffs have been repeatedly cut due to costs reductions in the industry, as I mentioned earlier, even with less money, the targets may still be met because you can get a bigger bang for your buck. There is also money specifically for heat networks, around £300 million, which is expected to be used to lever in private capital, a welcome development.

While I might sound fairly positive in general, the reduced focus on energy efficiency and demand reduction including the scrapping of zero carbon homes represents a complete failure of policy making in energy. I believe that this particular area says a lot about short-termism in UK politics and the weakness of our political leaders. Energy efficiency is such an obvious win on so many fronts.

And despite the fact that there are some positives for sustainable energy, the political rhetoric we have seen slamming renewables and progress towards sustainability is dangerous for investors and the country as a whole. Renewables are often dare I say it actually quite good or even the best (cheapest and greenest) option in some locations, for example renewable heat in off-grid homes is normally the best option. It seems that rather than speaking the obvious truth that lots of different things including renewables are good, the Government is more interested in keeping the far right wing of its party happy with anti-renewable sentiment. So perhaps a lot of the current change is more around internal conservative party politics and the pusillanimity of its leader rather than any real policy action.

So taking stock, what potential do we have to grow into a more sustainable energy system? Well we have smart meters, offshore wind, renewable heat, possibly heat networks, gas generation, shale gas (in their dreams), nuclear (probably late and even more expensive). It’s likely we’ll have a feed in tariff of some kind, some limited energy efficiency and potentially some onshore wind (some developers do have zero subsidy projects). We know that we don’t have zero carbon homes however they will come in in 2019 under the EU Zero Carbon Buildings Legislation so that’s more of a delay. We also know we don’t have money for CCS but that was always a long way off anyway and also not seen by all as a very good idea. It’s also important not to underestimate the role that technological innovation and cost reduction can have on transforming the system and arguably that change has already had a major impact.

I believe that it is not as bad as it sounds, look beyond the politics and the rhetoric and there are areas for growth and investment. It is certainly not as good as it could have been but it could have been significantly worse. The job now is to crack on, think positively and get on with delivering the sustainable energy system that is clearly already disrupting the centralised, supply led and dirty way of producing and using energy.

[1] https://www.conservatives.com/manifesto

[2] https://www.gov.uk/government/speeches/amber-rudds-speech-on-a-new-direction-for-uk-energy-policy

[3] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/479749/52229_Blue_Book_PU1865_Web_Accessible.pdf

[4] http://www.independent.co.uk/news/uk/politics/department-of-energy-and-climate-change-to-lose-200-jobs-a6734736.html

[5] http://www.theecologist.org/News/news_analysis/2986190/leaked_letter_rudd_admits_25_green_energy_undershoot_misled_parliament.html