It’s time to redress the balance of the UK’s energy trilemma

With the Government recently announcing its intention to publish a new climate change and emissions reduction plan by the end of 2016, Carbon2018's Melanie Kendall-Reid explains the importance of considering all aspects of the 'energy trilemma' to build an effective strategy.

Energy Secretary Amber Rudd’s recent confirmation that the UK’s new emissions reduction plan is expected to arrive at “the end of the year” is in direct response to the landmark global climate change agreement from the Paris COP21 Conference in December 2015.

The Paris agreement commits its signatories to the long-term goal of limiting global temperature increase well below 2C, with the intention to hold the increase to 1.5C. All participant countries must produce Nationally Determined Contributions (INDCs), to pursue domestic measures aimed at achieving these and to report regularly on their progress.

The UK’s climate change and emissions reduction plan will outline how the outcomes from the COP21 agreement will impact on future UK energy policy. The Government has acknowledged that there is a need for new policies to ensure the UK meets its post-2020 carbon targets.

Policy reset

The new approach is expected to build on the Government’s plans for a switch from coal to gas in the power sector, a new fleet of nuclear power stations and increased investment in renewables capacity. It will also address the requirement for innovation in areas such as energy efficiency, greener heat, reducing industrial emissions and transport where progress has so far been slow.

The Department of Energy and Climate Change (DECC) is already working with other departments on the new strategy but, disappointingly, there has been no commitment that any new policies will be rolled out imminently. The Government has reinforced its position that the UK’s first priority is to continue to meet its own carbon commitments and reduce emissions in the most cost-effective way. It is clear that ensuring security of supply whilst protecting the consumer from price rises remains its focus.

The Government has faced much criticism following the UK spending review announcement and the policy reset speech delivered by the Secretary of State for Energy and Climate Change in November 2015. There is significant discordance between its position in November and the agreement signed up to in Paris. Announcements such as the future of solar subsidies, wind power, low carbon homes and carbon capture and storage have raised many questions on the UK’s commitment to a long term decarbonisation strategy.

Prior to the climate change and emissions reduction plan being announced at the end of the year, the widely-anticipated new carbon tax and reporting framework is expected in the Spring Budget 2016. This is expected to deliver a new carbon tax to replace the revenue from the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) in the form of a tax administered through the energy bill removing the administrative burden of the CRC’s cumbersome reporting mechanism. The taxation is likely to affect a wider audience which will increase costs for those not already required to participate in the CRC. There will also be a new simplified reporting mechanism to replace current reporting requirements including CRC and Mandatory Carbon Reporting.

Opportunity knocks

Concerns regarding the Government’s approach are two-fold; firstly that it is short-sighted and secondly that it does not give a balanced consideration to all dimensions of the energy trilemma.

The Government is driving policies that are not embraced by all parties, prioritising reducing the cost of energy whilst its opponents press for greater investment in low carbon technologies. Currently, the cost of wholesale energy is at its lowest for several years. Whilst the Government has a responsibility to ensure that the energy suppliers do not profiteer from this, funds could be channelled into technological developments. The wholesale energy market is not predicted to recover in the short term so, by not acting now, the opportunity will be missed. 

Whilst it is widely acknowledged that there must be accountability in handing out subsidies that are ultimately paid by the consumer, this is necessary to support development of technologies that will in the long term bring greater benefit to the economy and the global climate change commitment. The UK Government must adopt a longer term vision to drive and support technological advancements in areas such as carbon storage, renewable generation, electric vehicles and demand response and it is making a substantial strategic mistake in not providing such support.

All aspects of the trilemma must be considered if the UK and the rest of the world are to build effective strategies and policies that deliver the necessary transformation of the energy system. The Government must recognise that developments in renewable technologies will continue globally whether this is embraced by the UK or not and it is at risk of being left behind if it fails to support investment. Whilst the Government is focusing on cutting consumer bills and ensuring security of supply, more attention must be given to environmental sustainability if the UK is to remain a leading light in climate change reduction. 

Green investment

The Prime Minister has dismissed criticism of climate policies as ‘total, utter nonsense’ rejecting allegations that recent changes to energy policies have undermined renewable technologies investor confidence but this is clearly not a view shared by the industry.

The UK has dropped from 8th to 11th in the EY Renewable Energy Country Attractiveness Index published in September 2015. The index ranks countries on the attractiveness of their renewable energy investment and deployment opportunities based on a number of macro, energy market and technology-specific indicators. The drop in ranking has been attributed to the wave of policies that have reduced or removed support for renewable energy projects which has confused investors and the lack of clarity and direction around UK energy policy which undermines investment in other areas, threatening new nuclear build, CCS, and the much-hyped shale-gas revolution.

The message is clear: the climate change and emissions reduction plan must redress the balance and provide clarity to the industry and investors. As a world-leader, the UK must present a cohesive and clear plan that places the required reduction in emissions at the heart of the matter. Investment must also be secured to ensure delivery or the plan will fail. The commitment made at the COP21 Summit is vital to the future of our planet – after all it was David Cameron that warned delegates that the ‘Earth is in peril’.  

What chance does the UK have of convincing the rest of the world to act on reducing carbon emissions when its own policies are incompatible with the Paris agreement?

Melanie Kendall-Reid is compliance director at Carbon2018, an energy services consultancy, focused on reducing cost, carbon and risk

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