How best to be green but also how best to make Britain secure

The 2007/2008 Energy Bill looks like something of a Cinderella. This is because the Climate Change and Planning Bills are more obviously news-worthy but also because the politically-charged issue of nuclear policy has been necessarily postponed because of government’s need to run a second nuclear consultation.

An announcement on nuclear power seems likely this month, December. Yet the Energy Bill is still important: it illustrates both new developments in government’s thinking and one of the major dilemmas facing energy (and other) policy-making.

Energy Bills since the mid-1980s have mostly been about pursuing the liberalisation agenda. The only echo of that agenda this time round is the persistence of the idea that offshore transmission should be subject to a competitive regime, a decision which almost certainly means further delay in renewables development. Elsewhere (and rightly) government stresses the need to get on with renewables development as quickly as possible.

But overall the flavour of this Energy Bill is different from the past and reflects the government’s more recent emphasis on security of supply and more rapid deployment of low-carbon technology for climate change mitigation. Offshore, there are to be improvements both to the regulatory framework to encourage private sector investment in gas storage, and to the licensing regime for oil and gas development.

Both of these are responses to security worries, aiming both to extract more of our diminishing hydrocarbon resources and to give the UK better protection against possible supply disruptions to imported gas — a probably exaggerated fear but a large political issue.

In terms of low-carbon technology, the Bill concentrates on carbon capture and storage (CCS) and on renewables. On CCS, the Bill looks likely to be limited to setting a better regulatory framework, rather than directly supporting CCS technology, though government plans some support for a single CCS demonstration elsewhere. On renewables, government now proposes to ‘band’ the Renewables Obligation (RO). This means offering different levels of subsidy to different renewable technologies according to their current state of development, in place of an existing system which offered flat-rate support to all renewables — and ultimately benefited only wind power.

This renewables proposal illustrates a major government policy dilemma — how far to change a policy mid-stream after learning about drawbacks in existing policy, versus sticking to current policy over long periods so as to give the private investment community the confidence to invest against a reasonably assured landscape.

The RO has disappointed in terms of the speed at which renewable technologies have been developed and in concentrating development only on wind, and the banding proposal represents a genuine attempt to get round this problem. But in practice the proposal in favour of banding is an uneasy half-way house, moving some but not all the way towards the more successful continental model, which guarantees fixed levels of (differentiated) payments without the UK focus on competition — the so-called feed-in tariff.

Whether the Bill’s proposal will reap some of the benefits of support more attuned to individual technologies, while avoiding investment disincentives because of the policy shift, is open to question.

The separation between Energy and Climate Change Bills is a pity — an Energy Bill is, and should be seen to be, the practical working out of policy for climate change. Perhaps next time?

Professor Gordon MacKerron, SPRU, University of Sussex.