An 80% cut is the right goal but have we the will to make it happen?

The first thing to say is that the review lacked ‘doing words’ — it failed to tell us much about what the government actually intends to do. The government’s energy review was significant in several ways. By re-opening the question of energy policy only three years after the previous white paper, government was signalling that it was not happy with current policies. Fears around energy security and a putative ‘energy gap’ were the main grounds for having another review so soon, although the need to consider the role of a resurgent nuclear industry was also important.

Certainly a significant and welcome development was the acknowledgement that we may have to cut our emissions by 80%, rather than the 60% mentioned in previous policy statements. Concerns around climate change have been around in the media for more than 20 years now, but more and more previously sceptical scientists and cautious policy types have become noticeably vocal recently in warning us about the seriousness of climate change. Changing our use of energy to this extent will require unprecedented investment, vision and political energy over a long time period and across society. It is not impossible, but we need to get organised.

So did the energy review get us on our way to that distant goal? The energy review is counting on three areas to deliver emissions reductions: the ‘re-birth’ of nuclear power, progress on energy efficiency, and the heavy emphasis on emissions trading.

Nuclear revival?

So what of this nuclear revival? The apparent ‘decision’ to re-launch nuclear is in fact barely a decision at all. The truth is that government has never decided against nuclear; the last review simply thought that nuclear was expensive and unattractive to investors, and therefore unlikely to play much of a role. As we indicated in our initial response to the review, the market is still unlikely to buy nuclear. Nevertheless, government’s signal that it is willing to give nuclear a bit of a leg-up will have material consequences. Although they have said that they will not subsidise nuclear, what is likely to happen now is that nuclear’s proponents will try to extract a string of concessions to make it more feasible.

Watch out for phrases like ‘establish a level playing field’, for which read ‘guarantee prices for nuclear electricity’. Just ‘one more’ concession, the industry will argue, will make it viable, such as accepting the liability for any risks from nuclear — including the liability of dealing with nuclear waste.

Nuclear is only a small part of our overall energy system: although it currently provides about 25% of our electricity the electricity generating sector itself accounts for 30% of the UK’s emissions. Nuclear therefore accounts for only 8% of UK energy use. The controversial nature of all things nuclear means that managing a nuclear rebirth is likely to become a distraction from other more important opportunities. Political energy will be sapped on a project that is as likely to fail as to succeed — Margaret Thatcher ordered ten new nuclear power stations and got just one, Sizewell B.

Demand reduction

Among the other options is a gamut of techniques that come under the heading ‘demand reduction’. Energy efficiency, the centrepiece of the previous review, receives scant attention. Does government think that this is just ‘too difficult’ because it involves too many people?

In the review, the text variously talks about smart metering and consumer displays as ways forward, yet these are two different things. This reinforces the impression of hurried drafting and shallowness. The review also delays action on these — apart from announcing yet another ‘high-level study’ — until 2010 or beyond.

Our analysis suggests that OFGEM has suppressed action on smart metering, all in the name of ‘consumer choice’. The review had little to say about this. Yet smart metering could go hand in hand with a range of emerging micro-generation options to provide cheaper and more sustainable energy, and to strengthen networks.

At peak times, electricity prices soar, reflecting the costs of backup capacity. This provides an opportunity for microgen. There are no significant technical reasons why smart meters should not be able to switch on and off micro-generation units such as household combined heat-and-power boilers when the wholesale market price for electricity reaches certain levels. Householders would be rewarded for providing peak power capacity, making investment in microgen more attractive.

And this is hardly new — in Australia in the late 1970s, electric water heaters could be controlled centrally to go off at peak times. What is lacking is the institutional infrastructure and the will to make this happen. The review offers little hope of moving OFGEM into a mode less dominated by an old and narrow ‘competition-for-its-ownsake’ agenda.

Emissions trading

Finally to emissions trading, which has been given too much weight. Emissions trading is a necessary but not sufficient policy on its own to help us toward big carbon reductions. The government has signalled that it wants to set a high price for carbon. It is to be welcomed that the Environment Secretary David Miliband has said that they will be setting rigorous limits by reducing the amount of UK carbon allowances. But in the context of the scheme’s European reach, in which other countries such as Germany are saying that they will set only weak limits, it is simply not in the gift of one government to set a high price for carbon.

On our way to 80%? It’s the right goal, but there’s a long way to go.

Alister Scott works at the Sussex Energy Group, an independent research group based at the University of Sussex with core funding from the ESRC. It is committed to providing research-based solutions and to engaging with policy debates. Get in touch to discuss your challenges. The group’s response to the energy review can be found at: www.sussex.ac.uk/sussexenergygroup