Tony Lodge is a leading energy analyst and a Research Fellow at the Centre for Policy Studies. Since 2007, he has consistently warned of the imminent energy crunch in his CPS papers including Clean Coal: a clean, secure and affordable alternative, Wind Chill: Why wind energy will not fill the UK’s energy gap, Step off the Gas: Why Overdependence On Gas Is Bad For the UK, and The Atomic Clock: How the Coalition is gambling with Britain’s energy policy.
This article originally appeared on Conservative Home.
When will the penny drop? When will the Tories (who should surely know better) realise they were mis-sold a bad Blair policy and cut their losses? Continuing the expensive ‘greenwash’ with the British people is not only dishonest, but threatens the Party’s reputation for understanding markets and cutting costs for hardworking people. Maintaining the present approach of supporting impossible and damaging targets threatens Britain’s economic competitiveness, jobs and industrial base. It also threatens to cost the Party the next election. Get energy strategy wrong and you will lose; remember Sir Edward Heath?
The Tories need to recall who first designed and agreed to the policy which squeezed the UK into the ill-fitting and anti-market straitjacket labelled ‘decarbonisation’, which has caused energy bills to soar and crucial generating capacity to be closed.
At the 2007 EU Council, Tony Blair committed the UK to meet a staggering 15 per cent of total energy from renewables, up from around 1.2 per cent at the time. No economic impact assessment was put before Blair (or commissioned) before this draconian and destructive target was agreed. Prime Ministers would do well to recognise the difference between energy and electricity; if Blair thought he was signing up to 15 per cent of electricity from so called green sources then he was wrong – he had in fact committed the UK to sourcing 35 per cent of electricity from renewables by 2020.
Last year renewables (including biomass) provided less than 11 per cent of UK electricity against coal and gas combined at 70 per cent. This Blair target has been an expensive disaster for Britain’s homes and industries struggling to pay energy bills. It could yet become be a national economic crisis as National Grid has warned again this week about blackouts and price spikes. The political ramifications are obvious.
Why was this allowed to happen?
Blair’s 2007 commitment was quickly followed by the Climate Change Act 2008, which set a legally binding framework for a reduction in greenhouse gas emissions of 34 per centby 2020, based on 1990 levels.
Coupled with this was the Government’s commitment to close over 12GW (gigawatts) of coal and oil power plants by 2015 to meet EU emissions rules. Despite calls to ignore the EU and place some of this capacity into a reserve ‘back up’, the Coalition has approved the closures. New proposals to deliver new power plants and grid investments represent the largest intervention in the electricity market since the old nationalised Central Electricity Generating Board was responsible, pre-electricity privatisation. But these new gas plants remain unbuilt.
More intervention to try and meet targets has resulted with a new and rising unilateral UK price for carbon emissions from power plants, starting at £16 per tonne of CO2 emitted, from April. This carbon price floor has been introduced despite a much lower carbon price in the rest of Europe. However, where this tax was supposed to encourage the construction of low carbon power plants, it has merely slapped higher prices on coal and gas plants and therefore pushed up consumers’ bills. Australia has recently ditched its own high carbon tax following the election of Tony Abbott. The UK carbon tax will add about £1bn a year to renewables subsidies in 2017.
As well as generous ‘capacity payments’ for back-up power plants to help shadow intermittent renewables, a new Emissions Performance Standard (EPS) will be introduced to ban new coal plants; irrespective of the coal price being low, particularly as a result of the US shale boom.
If the UK thinks it is leading Europe with environmental best practice then it should look to Holland and Germany, where new large modern coal plants are being completed and more are planned. These efficient plants will quickly take advantage of record low coal prices as global coal output outstrips demand.
So what should we do?
We must drop the pretence that the UK enjoys an electricity market – it doesn’t. Instead it has created, through decarbonisation targets – a heavily interventionist and subsidy drunk sector which is highly regulated.