Too Big A Bill!

Liberal Democrat Energy Spokesman Andrew Stunell MP argues that the Government's Energy Bill is missing the point and costing the Earth

It may seem a little harsh to attack the Government for not having a proper energy policy when they’ve just brought forward a 270 page Energy Bill. Surely that’s enough energy policy? Well, no, actually.

But what it doesn’t have is any strategic vision, either about where we need to get to, or about how we could make a start to get there. In fact Ministers in Committee kept cutting out the best ideas, such as proper support for combined heat and power generation, whilst their introduction of ‘BETTA’ to Scotland threatens to repeat the damage to intermittent generators that NETA has already done in England.

It will also be an extraordinarily expensive piece of legislation. The new NDA will pick up the full cost of all nuclear waste and reprocessing liabilities. The size of the bill is uncertain, but it is certainly tens of billions of pounds. It is the biggest nuclear subsidy ever by taxpayers (and that is really saying something!). No wonder BNFL are jubilant, and British Energy hopeful they may survive after all. Meanwhile the idea of spending £5 million a year on making all replacement electricity meters two way to facilitate micro CHP usage has been rejected yet again.

Post Offices and Computer Systems get in the way

As opposition spokesperson on energy it has been rather too easy to find flaws in the Bill. I sometimes feel sorry for the succession of government Energy Ministers struggling to get on top of their brief. We’ve had five since New Labour came to power, average stay in post 1 year 5 months, and most of them with plenty else to think about at the same time. For instance current Energy Minister Stephen Timms is simultaneously in the firing line over the closure of several thousand local post offices, and also responsible for the success (or failure) of the Government’s IT programme. Not surprisingly Energy Policy doesn’t get his full-time attention.

So what should have been in the Energy Bill? With the background of the Kyoto agreement, and the Report by the Royal Commission on Environmental Protection (RCEP), the Government set up the PIU to work out how the UK could move towards sustainability. Considering it was produced by the Cabinet Office it was surprisingly radical, even though it was several steps more cautious and modest than the RCEP Report. That was followed – eventually – by the White Paper. Even more watered down, but pointing out that clear policy options existed, and that a rapid start was needed if the slogans mouthed by Ministers were ever to mean anything.

Worsa not Betta

They want to cut greenhouse gas emissions by 50% over the next decades. We are nowhere near being on course for that with existing policies. So the Energy Bill should have been the major implementation document. Instead it does some worthy but peripheral things, and will have conflicting effects on achieving the policy aims in the White Paper, with the new pricing and transmission regimes pulling one way (WORSA, not BETTA, in my view), and only the off shore renewables legislation providing a small but welcome pull in the other.

Three big things are missing from the Bill.

First there should have been a major initiative on energy conservation and efficiency, particularly in the domestic sector. Around 30% of all carbon emissions in the UK are from houses. Most estimates suggest that around half of that is simply wasted. Improvements are quite easy to achieve, and can readily save consumers money, improve their comfort levels, reduce carbon emissions, and cut import bills. Further more, the cost of investment to save, say, 50MW via improved efficiency of consumption is actually significantly less than the cost of building a new 50MW of generating capacity, whether of wind, nuclear, or even gas. It always has been, but the problem is that it is hard to devise a market mechanism to trigger it.

The existing policies that aim to reward or regulate energy suppliers into paying for conservation measures and so selling less of their product to consumers is at best clumsy and slow. During the passage of the Bill the Government announced that it no longer believed that 5 million tons of carbon could be saved using existing mechanisms, and now predict savings will amount to only 4.2 million tons. Astonishingly even when their own backbenchers implored them to do so, they refused to put any measures into the Bill to bring performance back up to the original modest target, let alone raise their sights further. The Bill actually takes us backwards, not forwards, simply accepting a failing trend, instead of reversing it.

The domestic sector is not the only area where energy is wasted, but it is certainly the most profligate, and action there has the double benefit of also raising public awareness and changing the culture of electors to the whole issue of climate change.

Coalition of Silence

Unfortunately there is a coalition of silence on the high value-added of conservation. Whatever technology you advocate to solve the carbon emission problem, it is not in your interests to say “actually you’d get far better value for money if you just stopped wasting energy”. So in the competition for investment conservation measures lose out every time. As a result hardly anyone, even in the energy industry, knows that in the last ten years whilst GDP has risen by over 30%, gross energy use including transport growth has risen by less than 3%. That is 3% in 10 years, not per annum. In Germany they have actually managed a reduction in gross energy consumption in the same ten years. Despite everything we are getting significantly better at using energy.

A policy to stabilise gross energy use, and then to gradually reduce it over the decades, isn’t from cloud cuckoo land. It is just that it doesn’t fit in with the sales pitch of the advocates of generation capacity.

Second, there should have been a clear commitment to a transformed energy industry, where resilience and security of supply are enhanced by moving generation nearer to consumption, recognising the value of embedded generation in general, and high efficiency micro co-generation in particular, and ensuring a fair price for producers at every scale.

The fastest growing demand for energy is in the South East of England, but most of our current electricity generating capacity is located either on coalfields near the sites of our vanished heavy industry, or, if its nuclear, dotted round the coastline as far away from people as possible. Over the next 40 years it will all have to be replaced. Most of the debate so far has focused on the fuel to be used, rather than the location of the plant. Meanwhile a million central heating boilers are replaced each year. Of course those boilers are where people are, exactly where energy demand is rising. Suppose they were all capable of generating a kilowatt of electricity. It would transform the job of the grid next time England lose on penalties if with a tweak of control technology they all struck up for 20 minutes at the end of the match!

But the government seems strangely reluctant to do even the simplest things to facilitate this. Most of the barriers are regulatory, and easily within the grasp of Ofgem and its licensing regime on the one hand, and Building Regulations on the other. But every year another million boilers go in without micro generation capacity, and, in a completely separate silo, a million electricity meters are replaced without two way capacity. Meanwhile BG with a fully functioning micro CHP unit has put it back up on the shelf because they don’t see a market for it.

Third, the Bill should recognise that Rome wasn’t built in a day – though they still had pretty good underfloor heating. We have at least 25 years before we are in any serious difficulty with gas supplies; even a 1% per year increase in renewable generation will give us 50% renewables by 2050; and conservation can lead us to having lower, not higher, demands for energy overall by then. The route to a sustainable energy policy is an uphill marathon, not an impossible sprint up the Matterhorn.

So the first building blocks should be conservation and efficiency, backed up by the most vigorous use of combined heat and power, so that the energy we use – inevitably mostly fossil fuel for the next 20 years – is used sparingly and efficiently. The good news is that those steps provide some of the infrastructure for embedded renewables to come easily into play thereafter.

That is not to say that large renewable generation schemes should be slowed down, and indeed the next building block should be the development of the next technologies we will need. Tidal stream power along the south and east coasts would have the benefit of producing nearest to the point of consumption, probably, but we’ve got 20 years to work that out.

Missed Opportunity

No one living in 1904 and looking at the infant electricity industry then could have guessed at what the industry would be like in 1954, and no one 50 years ago would have got it right about fuel sources in use today. We should remember that we are equally unlikely to be right about the shape and size of the energy industry in 2050. But we can be sure that it will have to be transformed.

What a missed opportunity the Energy Bill is to provide direction and impetus to that transformation, and to lay the foundations for the UK to have a prosperous, sustainable economy, able to play its full part in stabilising global warming, and incidentally taking pole position in profiting internationally from the next industrial revolution, just as Britain so successfully did from the first one 150 years ago.

Liberal Democrats

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