An exhausted approach to the energy issue

It was obvious, really. Liberal Democrat Chris Huhne, the minister who runs the UK Department of Energy and Climate Change (DECC), isn’t really worried about making lots of new energy for a growing economy: he’s worried about you saving it, and you paying more for it, because of climate change. But such a position isn’t just that of Chris Huhne, whatever right-wing Tories may say. It’s all in the political programme issued by the Liberal-Conservative Coalition straight after it was formed in May. This is the remote irrationalism of the new oligarchy (1).

The Annual Energy Statement, issued last week, only confirms the joint Lib-Con policy of two months ago (2). It is alarmist about climate change, and more New Labour than New Labour on the need for emissions cuts, renewable energy, the microgeneration of energy in the home and the insulation of homes, too. This is the face of what David Cameron himself called ‘the greenest government ever’.

For Chris Huhne & Co, ‘ambition’ means you using less heating, less electricity and less petrol – or, in compensation, generating your own and further disrupting your home by insulating it with financial help from energy providers and high street stores. This Green Deal is part of his ambitious and oh-so-trendy ‘suite’ of energy policies, complete with:

• six ‘illustrative ‘2050 Pathways’ to show how New Labour’s plans for an 80 per cent cut in emissions by mid-century are ‘achievable and compatible with keeping the lights on’;
• a new online ‘2050 Calculator’ to get you to ‘explore the trade-offs in building a 2050 energy system’;
• Gordon Brown’s old ‘smart meters’ in every home (an Ofgem prospectus on smart meters, also published last week, has 61 pages and is backed by 14 supporting documents – a great omen for smartness);
• the New Labour canard that homes are responsible for ‘a quarter’ of Britain’s carbon emissions.

Mr Huhne: an Englishman’s home may be his castle to you, but it initiates only about 27 per cent of UK emissions. In terms of the CO2 emissions generated on-site, the figure is about 15 per cent. Use of lights, appliances, consumer electronics and IT in the home only sets off CO2 emissions back at electricity power stations. Are you interested in power stations, or are you really saying that emissions based on them are the householder’s responsibility?

For Huhne, ambition does not extend to backing nuclear energy. Before the election, some Tories did make some noises about supporting nuclear. But though major capitalist corporations are concerned about power cuts, they lack the stomach or the influence to stand up to NIMBY opponents of nuclear. Their annual reports are full of sustainability, and their children are not keen on nuclear either.

So, for the Coalition nuclear is okay, but only without public subsidy. However, the government will continue to subsidise renewables. Meanwhile, the ongoing hassle of getting renewable technologies to your home, installing, cleaning and maintaining them – that’s your responsibility, aka the Big Society.

Still less does the Coalition want to stimulate public or private sector research into new energy technologies. The Annual Energy Statement has no fewer than five mentions of the word ‘vision’, 20 of the date 2050, and 31 of the word ‘future’. There are, however, just two mentions of ‘RD&D’ (research, development and deployment): one on the need to coordinate public RD&D better and make definitions for it – predictably – more elastic; the other, on the need to promote RD&D (and, no doubt, defray costs for it) abroad. Of course, no mention is made of how, in an already weak international picture for energy research, Britain has one of the developed world’s lowest expenditures on RD&D as a fraction of GDP, spending just one pound on it for every million pounds of wealth the country generates (3).

For Huhne and the DECC, the era of cheap energy is over. Because of what BP did in the Gulf of Mexico, a shadow has also fallen over oil and gas. The government will continue Labour’s public-sector investment in four demonstration projects for carbon capture and storage from coal plants, meaning that it will continue with the commitment of Ed Miliband, Huhne’s predecessor at DECC, to spend between £7.2billion and £9.5billion. Yet if these numbers sound impressive, they are very modest compared with the £100billion of investment in power supply that the Annual Energy Statement says will be needed by 2020. And even that figure is deceptive: Ofgem, the gas and electricity regulator, reckons that up to £200billion of electricity investment will be needed. This, Ofgem notes, is more than double the rate of investment spending compared to the past 10 years, and will necessarily be done ‘at a cost to consumers in the near term’ (4).

The madness continues. The government will press the European Union to cut emissions by 30 per cent by 2020, not 20 per cent as was planned. It will reform the climate change levy – a tax on business – so as to get a ‘strong’ price for carbon on financial markets, where it is traded. A stronger price for carbon is needed, the DECC argues, to incentivise the required levels of new low-carbon investment. However, it adds that, by itself, a strong carbon price ‘will not deliver the new investment that is needed, nor will it keep the lights on in the meantime. What is required is a clear market design that provides consistent, long-term signals for investment, helping to secure the billions of pounds of new generating capacity and transmission and distribution infrastructure that is required. In addition, we must enable effective financial market involvement.’

Ah, those price signals, those market designs, those effective financial institutions! These things really will keep the lights on.

James Woudhuysen is professor of forecasting and innovation at De Montfort university, Leicester. He is author, with Joe Kaplinsky, of Energise! A Future for Energy Innovation, published by Beautiful Books. (Buy this book from Amazon(UK).)