Many Strings to the Energy Bow

Indeed, two recently published UK Government White Papers entitled “The UK Low Carbon Transition Plan” and “The UK Renewable Energy Strategy 2009” illustrate just how much of a diversification and realignment in energy use there needs to be in order to reverse the ever-increasing effects of climate change.

The Government’s five point plan to tackle climate change is contained in the Transition Plan, which is: (1) protecting the public from immediate risk; (2) preparing for the future; (3) limiting the severity of future climate change; (4) building a low carbon UK; and (5) supporting individuals, communities and businesses to play their part.

The core message of the Energy Strategy is the need to significantly increase our use of renewable energy – specifically renewable electricity, heat and transport. Not only is there an apparent need to do this, but legally-binding targets were set down in the Climate Change Act last November (making the UK the first country in the world to set legally binding carbon budgets). One target is to ensure 15% of our energy comes from renewable sources by 2020.

This figure may not seem significant, but it would in fact amount to a seven-fold increase in the share of renewables in scarcely more than a decade. Renewables amounted to 2.25% in the UK in 2008.

Although it has pledged investment (for instance, financial support in the order of £30 billion for renewable electricity and heat between now and 2020), the Government is keen to illustrate that their role alone is not enough. Communities, businesses and individuals all need to play their part.

There is also a big onus on the private sector to contribute on the investment front. Notwithstanding the level of contribution that is required, the Government has addressed its need to provide incentives in order to stimulate this process, through funding and guidance.

Throughout both the White Papers is a constant reminder regarding the clear and significant economic benefits of implementing this renewable strategy.

In addition, the White Papers categorically state the cost of inaction to be far greater. It is understandable that such messages would be used given the scale of the task at hand.

But many will still ask: Could we do more and, more importantly, does more need to be done?

The goal appears to be to maximise the environmental, economic and employment opportunities for the UK from renewables, forging the UK into the location of choice for inward investment and a world class centre of energy expertise.

If this can be achieved, especially with regard to the target of having more than 1.2 million “green collar” workers by 2020, few will have complaints.

But given the number of factors and stakeholders that have an influence over our economy, it is hard to believe that the Government (regardless of party) will achieve the necessary objectives that the White Papers reveal.

The Government acknowledges that the precise breakdown of the 2020 renewable energy target between technologies will depend on how investors respond to the incentives that have been put in place.

Security of energy supply is also mooted as a rationale to develop a renewable energy strategy of this kind, with the Government aiming to reduce the UK’s overall fossil fuel demand by around 10% and gas imports by 20-30% against what they would have been by 2020.

Whatever the motivation or justification for the renewable energy strategy, the process is now in motion. With the cost of the strategy well known, many will hope that the much predicted economic benefits come to fruition.

Simon W. Holden is an Associate in the London office of international law firm Faegre & Benson LLP, where he specialises in all aspects of corporate and securities law. He represents a number of clients in the renewable, clean technology and carbon credits trading sectors.

Mr Holden can be contacted by telephone on +44 (0)20 7450 4521 or email at sholden@faegre.com