The Future for Energy is diverse, local and reliable, says Tim Yeo MP, Conservative Shadow Environment Secretary.
It is now becoming common practice amongst well-meaning politicians to wring their hands with despair over global climate change - "the single most important issue that we face as a global community", to quote the Prime Minister.
And Michael Howard, Leader of the Conservatives, also laid his climate change cards on the table recently, calling for political leadership and international action to achieve a more sustainable way of life.
The next government will have an enormous challenge to deal with in relation to energy. The real image of the UK as a net importer of gas, whilst our nuclear capacity is facing decommissioning, raises the risk stakes for both government and industry. Moreover, the global picture is one of heightened awareness and alarm at the obvious symptoms of climate change and the rate of our increasing energy consumption without corresponding resource efficiency.
A comprehensive and long term energy policy should have three overriding objectives – environmental, economic and social.
Labour’s record has been one of rhetoric but little delivery. Carbon Dioxide emissions have slightly increased since 1997, renewable energy still stands at less than 3% with the only real winner being onshore wind, and domestic energy efficiency targets, originally set by the last Conservative Government in the 1995 Home Energy and Conservation Act, have been downgraded. Millions remain in fuel poverty. The very real question of security of supply has been consistently avoided.
An incoming Conservative Government would immediately conduct a serious, honest and transparent energy review.
There are several key issues to be resolved; firstly, the question of energy security and supply and how far we want or need to be self-sufficient or reliant upon unstable parts of the world and the implications of that decision for our infra-structure capacity; secondly, our international commitment to a reduction in greenhouse gas emissions and the feasibility of existing domestic targets; thirdly, progress in renewable generation and technological advance, and finally, the future for nuclear, taking into account its cost-effectiveness, management of waste and potential safety.
Better Homes for all
As always, the solution may be closer to home than we think.
Households are one of the biggest contributors to UK carbon dioxide emissions, responsible for a quarter of all emissions. The Energy Saving Trust estimates that the average UK household emits six tonnes of CO2 per year, but by following a few simple energy efficient measures, each household can cut its carbon emissions by two tonnes.
Moreover, they could save £200 annually on fuel bills.
Energy efficiency is the least exciting of subjects to the average householder, who simply compares the upfront cost of a tungsten light bulb compared with a compact fluorescent one, little knowing that they could probably get a free one from their local Energy Efficiency Advice Centre and that there is much more to it than that.
However, if the consumer could also be introduced to the possibility of generating their own energy at home through microgeneration, the image of being an energy entrepreneur – up to date with the latest technologies and even able to sell energy back to the grid – may attract their interest more directly in real measures to partake in climate change mitigation.
Designing and constructing environmentally-efficient buildings – both domestic and commercial – is no longer a question of choice, and if the house builders and developers were really on the ball, they would be looking ahead of the market roadmap.
If every UK household capable of installing cavity wall insulation did so, we would save £670 million a year – enough energy to heat and power 1.8 million homes for the same period. A solar thermal system can provide up to 70 per cent of a household’s annual domestic hot water requirements, and have a service life of more than 20 years. Solar collectors are easier and cheaper to install when a building is under construction, when scaffolding is in place and alternative systems do not have to be removed. Yet, so many remain unaware of these opportunities.
Government can certainly help and provide a long term framework to give investors confidence and send a signal to all parties that zero emissions homes will become the norm.
We could use the stamp duty as a fiscal mechanism to reward house movers who invest in energy efficiency for their home.
We could tighten up the Building Regulations to provide a single thermal efficiency and emissions standard that is properly enforced.
The Energy Efficiency Commitment was originally a Conservative initiative and has worked well so far but could be expanded further to include other players, such as supermarkets and banks. It could offer suppliers tradeable obligations to provide energy efficiency, microgenerators and a two-way metre to enable householders to sell their surplus.
The Winter Fuel Payment could be linked to energy efficiency measures rather than simply subsidising the poor to pay their fuel bills in a badly insulated home. That would be a much more sustainable solution to fuel poverty.
Most importantly, we all need to emancipate ourselves from the idea of ‘energy supply’ and move on in consumer jargon to the notion of ‘energy service’ – with incentives for conservation and lower carbon emissions.
The Market can provide
Emissions trading is one of the EU’s more exciting projects and is the most cost-effective way of achieving emission reductions. This will satisfy business, but environmentalists will only be content if actual emission reductions are mandated through the setting of the caps.
Setting a cap that imposes an obligation to reduce emissions – or ensuring the market is short – would appear to be the only way to ensure trades take place and emissions are cut. Market logic suggests that the environmental policy objectives can, and will, only be achieved by creating a market that has scarcity. Without this, from an environmental policy perspective, there is not much point in having a trading scheme as no reductions would take place. It should not be a way for the big players to set themselves goals that they know can be easily achieved.
The promotion and extension of carbon trading will be a major objective for the next Conservative Government. But to be effective it must be rigorously policed and must be built on a level playing field, with a consistent carbon value across all participants so that no nation’s industry can claim to be at a competitive disadvantage. No one has any problems with tough targets as long as the whole system is seen to be fair and transparent.
Is it getting too windy?
The Non-Fossil Fuel Obligation (NFFO) during the 1990s was a policy whereby bankable power purchase contracts were awarded to renewable energy projects according to their need. This policy was a competitive tendering process and was flexible enough to support technologies at a range of different stages of commercialisation.
The Renewables Obligation (RO), which replaced the NFFO, is based on a different philosophy. The idea is that the Government sets a broad framework of market demand for renewable electricity and the market decides on which technologies to bring forward.
Onshore wind energy has been boosted considerably by the introduction of the RO. It is one of the cheapest sources of renewable electricity and, unlike landfill gas, is not limited by the size of the resource available. The increase in activity in wind and the stalling of activity in biomass has lead the Government to declare that it expects the 10% target to be met almost exclusively by existing renewable generation plus new wind capacity. This target looks near impossible to meet.
The Government’s greatest mistake is its neglect of offshore wind, biomass and the emerging technologies of solar, wave and tidal power.
Relegating other renewables to a minor role until beyond 2020 is undesirable for three reasons. From the perspective of biomass alone, there is a loss of rural diversity and waste management benefits from exploiting biomass, along with loss of the contribution it can make to systems benefits as a non-intermittent renewable.
There is also a lack of grid capacity in areas where developers are most interested in bringing offshore wind energy projects forward. New infrastructure is required, comprising new power lines that can extend offshore.
Moreover, the emphasis on wind is posing a problem for many local communities who are feeling bulldozed into onshore wind farms that may have an adverse impact on their local area and environment.
We should not allow promising newer technologies to be victims of a classic poverty trap – what the environmentalists frequently call “the valley of death” – the gap between grant aid and the ongoing support provided through the Renewables Obligation. We support the principle of the Renewables Obligation but it does need reform it so that it bridges the so-called valley of death and provides access to the necessary start-up funds.
We also want to make the most of a proven, but shamefully underused technology, which is more than twice as efficient as centrally-generated energy sources. If only we used CHP – combined heat and power – properly we could greatly expand the possibilities for household energy efficiency. For every 1000 megawatts of CHP energy operating in the UK, nearly one million tonnes of carbon are saved each year.
The Future is Bright, the Future is Green
As the picture of nuclear decommissioning, imported gas and a higher price for fossil fuels emerges, it is time to look again at the energy we use and where we get it from. Government must set the policy framework and the drivers and be prepared to take on some of the capital investment risk.
At the moment, the risk and economic reward factors for large centralised power stations and new nuclear plants look bleak, notwithstanding adverse popular reaction. Yet, I also see real risks in increasing our dependence on supply from volatile countries.
We need a diverse energy portfolio, so that our dependence is spread across various sources of various sizes with more localised networks. I believe strongly in boosting our renewable generation, but it is wrong to place all our eggs in one intermittent basket.
Ultimately, the most cost-effective route to reductions in carbon emissions is through the promotion of energy efficiency. Cutting back our consumption through technological advance is the best way to ensure that the lights stay on and for longer.
Tim Yeo is the Shadow Secretary of State for the Environment and Transport.
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