Michael Liebreich: Policy alignment needed to make Britain a low-carbon leader

The UK can "truly be a leader" in the global low-carbon economy, but only if a policy alignment is introduced that allows considerations of the energy mix to also shape trade, tax and research and development (R&D) legislation, the chairman of Bloomberg New Energy Finance (BNEF) has said.

Speaking as a guest lecturer at an All-Party Parliamentary Group for Renewable and Sustainability Energy (PRASEG) event in London on Wednesday (23 November), BNEF’s Michael Liebreich suggested that a revamp of policy frameworks to account for “systems thinking” could iron-out deficiencies in the UK’s energy matrix, but that it might take “a generation of sacrifice” to implement.

“We need systems thinking here,” Liebreich said. “There is a vehicle for a joined-up way of thinking. We should be out there explaining how we can jump the chasm. The system thinking that we need shouldn’t just say that the lights won’t go out, it should look at job creation and other strategies too.

“The whole world is going in a certain direction, and we should have policies that align everything as a joined-up Government; that shape trade policies, taxation polices, R&D policies and procurement. Get those all aligned and this country can truly be a leader. At a systems level, this is a massive opportunity… We almost need a generation of sacrifice, where we put money into cleaning up.”

BNEF studies have revealed that the levelised cost of electricity (LCOE) of onshore wind power in the UK was averaging at $85 per MWh in 2015, compared with $115 for combined-cycle gas and $115 for coal-fired power. For Liebreich, aligning energy considerations with taxation, planning and procurement decisions would allow these costs to fall lower during a global slump in renewables investment – which fell by 8%.

Liebreich noted that international wind energy prices in particular have a history of beating global price forecasts, a feat which also rings true in the UK. In 2013, the UK Government set a $150 per MWh target for offshore wind by 2022, and figures from the Offshore Wind Programme board suggest that the UK is already operating at that target – which has since been amended to £100 per MWh for 2020.

But with the UK now sliding down the table in regards to renewable energy attractiveness for investors – it is currently placed 14th – Liebreich said that the private sector should set and provide “volume signals” to indicate that it was committed to renewable deployment and to improve investor confidence. “Policy is destiny to a certain extent,” he said. “Whether or not consumers see the low-costs of renewable power is down to policy. To be a real market you need two things, not just the price, but also the market players need to be deciding volume.

“This is what we’re missing in the UK. We’ve got volume being decided either politically or by the National Grid and there are price signals but not volume signals which is a problem. You need both of those, with price and volume set by private players.”

The £82bn nuclear project

Renewables have steadily claimed a greater share of the UK’s energy mix, accounting for 24.7% of electricity generation in 2015. Restructuring of policies – which Liebreich claimed wouldn’t have to include subsidies to renewables – along with the introduction of a business-driven market, could enable the UK to foster low-carbon growth at an accelerated pace.

However, the Government’s recent decision to approve the controversial Hinkley Point C nuclear project has been met by criticism from organisations that are concerned about the project’s value for money.

Liebreich revealed that he was “comfortable” with the growth of nuclear in the UK – which currently accounts for 26% of all electricity generation – but echoed previous concerns about the cost of Hinkley. “As a country, we’ve decided that part of the solution is nuclear, and I’m very comfortable with that,” he added. “The problem is that it’s not actually an £18bn project for UK PLC – this is an £82bn project, once you consider capacity factors over 35 years and the scale of the project.

“Could we not simply remove the 3.2GW of baseload at a fraction of this cost? That should have been done before this, and I just find this a historically bad deal.”

The construction of Hinkley Point C will create an estimated 25,000 jobs, with completion scheduled for 2025. It will provide 7% of Britain’s electricity, enough power for six million homes, for almost 60 years. With an agreed strike price of £92.50/MWh, the 3.2GW facility will cost an initial £18bn. However, Liebreich went on to point out that, when combing the 35-year tariff costs with uptime influences, the costs could begin to spiral.

The introduction of the Hinkley project has provided the necessary assurances that the Government needed to confirm its phase-out of coal-fired power plants by 2025. Liebreich heralded that phase-out decision and claimed that the world will need to match this initiative if we are to reach the climate targets set out in the Paris Agreement.

Matt Mace

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