Britain powers ahead (of Luxembourg and Malta)

The government’s attempts to reduce carbon dioxide emissions and deliver increased renewable energy are a sorry tale of missed opportunities and underperformance. Does the new consultation on a Renewable Energy Strategy have the potential to break this woeful cycle?

The Renewable Energy Strategy is being developed to respond to the March 2007 agreement by EU heads of state to commit the EU to producing 20 per cent of its energy from renewable sources by 2020. The UK has subsequently been allocated an initial national target of 15 per cent renewable energy within this overall EU target.

Of this, the electricity sector is expected to deliver around 32 per cent renewables, the heat sector 14 per cent and transport 10 per cent.

The launch of the consultation prompted headlines about the installation of 7,000 wind turbines on and offshore in the UK, and the difficulty of achieving such a significant shift in how electricity, in particular, was produced.

Actually, this would not be unprecedented — in the 1990s gas-fired generation grew from almost nothing to around 30 per cent of the UK’s electricity generation. But achieving this sort of technical change will require a clear policy framework and an environment in which new technologies can thrive. This is where the UK has fallen down so far.

Despite having provided support for renewable electricity technologies since 1990, the UK’s record is not impressive. This country has some of the best renewable resources in Europe, especially for wind and wave, but we lag far behind most European countries in developing them.

Of the 25 EU member states, the UK ranks as 23rd in terms of the percentage of renewable energy we use, just ahead of Luxemburg and Malta.

We will not meet the government’s target for 10 per cent of electricity to come from renewable sources by 2010. This impending failure is not because the technologies don’t work — experience in other European countries shows that large amounts of renewable generation can be deployed rapidly if there is sufficient policy support.

Rather it is the design of the main support mechanism — the Renewables Obligation (RO) — which is proving to be one of the main barriers. Simply put, the RO does not adequately reduce the level of financial uncertainty for developers who might otherwise invest in these newer, riskier technologies.

In the 2007 energy white paper, the government also set a longer-term target of around 20 per cent renewable electricity by 2020. However, even the changes to the RO currently being considered as part of the resulting Energy Bill are not expected to deliver this: projections put renewable electricity at about 14 per cent of total supply by 2020.

So even the most optimistic energy commentator would have to admit that meeting the EU target will be a challenge for the UK, starting as it does from such an unimpressive base. A good starting point would be to consider — and even adopt — approaches which have worked in other countries. The strategy consultation document does discuss the successful mechanisms in other member states, known as Feed In Tariffs, but then dismisses them for most renewable electricity developments.

The rejection is not based on cost, as modelling shows that a Feed In Tariff might prove to be cheaper than the RO in delivering the required level of output. Instead, Feed Ins are rejected because the government is concerned that the uncertainty of introducing them to the UK electricity market might discourage investors.

This is richly ironic, given that the RO has been revised and changed five times since its introduction in 2002, and attempting to meet the EU target will require further far-reaching, fundamental modifications. If there was ever a policy mechanism in which investors can have little confidence, it is the RO.

Bizarrely, though, the consultation does raise the possibility of abandoning the RO in favour of Feed Ins for one set of technologies — microgeneration — because of the level of bureaucracy and complexity associated with accessing the RO for individual, household-level generators.

This is welcome, although there is no indication of when this change might come about, and even if it does encourage a rapid expansion of microgeneration this will only play a very small role in delivering the necessary growth in renewables in the electricity sector as a whole.

Another major barrier for renewables in the UK is the issue of whether generating projects can get access to the grid in order to deliver their output. Many other European countries — including those with the most rapidly expanding renewable electricity sectors — allow renewables projects ‘priority access’ to transmission and distribution networks. This means that renewable generation is delivered in preference to conventional, often fossil fuel output, so reducing emissions of carbon dioxide.

The principle of requiring priority access for renewables is likely to form part of the Renewable Energy Directive currently being finalised by the European Commission. However, the consultation document indicates that the UK will not support such a move, on the grounds that it might disadvantage conventional generators.

This dilemma neatly encapsulates one of the government’s main problems with energy policy. Despite its proclamations about the urgency of climate change, it consistently fails to put in place mechanisms which it knows will be effective, but which it fears will upset incumbents.

Grid access problems also threaten to derail the vision of a massive expansion of the offshore wind sector, which the government expects to contribute around 19 per cent of the renewable energy target.

Despite considering how to construct and operate transmission lines from offshore wind farms to the shore since 2002 — which is to say, the past six years — it still hasn’t finalised the details of these, meaning that there is no regulatory framework in which to build new lines and bring the power on shore.

Six years for a new regulatory regime doesn’t point to a great deal of urgency for driving the development of a viable offshore wind sector.

The consultation’s suggestions for other energy sectors are even less developed than those for renewable electricity. Renewable transport fuels — understandably — are proving difficult to evaluate in the longer term because of the emerging issue of the sustainability of biofuels. Rightly, the government intends to meet the ten per cent renewable transport fuel target only if the sustainability of the fuels can be established.

The big disappointment in the consultation is on measures to encourage the development of renewable heat, which would make a significant contribution to the renewable energy target as well as reducing carbon dioxide emissions. Policy making on the subject is proving painfully slow, with discussion in the document still limited to the range of possible support mechanisms.

This is, of course, a necessary process, but with no end date for a mechanism to be introduced, there is a feeling that it will take years to develop, and that the contribution of renewable heat to the 2020 target will ultimately prove to be minimal.

Overall, the Renewable Energy Strategy consultation threatens to continue the same depressing trend set in previous attempts at developing a sustainable energy policy for the UK. Although it has some interesting ideas, they are in many cases ten years too late to deliver the required rate of deployment at reasonable cost.

Instead, if it is to meet the target, it looks like the UK will have to scramble around, spending additional money to compensate for the inaction and timidity of the government since it came to office.

As well as the additional costs caused by late action, the UK is pressing in Europe for renewable energy paid for or imported from other countries to be counted towards the achievement of the target. Economically, this might make sense as a short-term measure, but the problem with this approach is that it will fail to put the UK firmly on the path to a long-term, strategic development of sustainable energy systems.

Perhaps even worse — and a fundamental error if you want to produce a coherent strategy — the renewable energy consultation only gives half a picture. The 2007 EU heads-of-state agreement also committed member states to reducing energy consumption by 20 per cent by 2020. The lower energy consumption is, the less renewable energy will be needed to meet the 15 per cent target.

Even an energy novice would grasp the idea that reducing energy consumption has a key role to play in whether and how the UK meets its renewable energy target.

The consultation document does mention that there will be a further consultation on energy efficiency later in the year, but without dwelling on its significance for the renewables target.

The EU target provides an ideal opportunity to consider some clear-cut regulatory measures to require improvements in energy performance on a much shorter timescale, and the consultation later this year must seize that opportunity. In the meantime, the disconnection between the two processes is a stark reminder of the lack of joined up thinking in Whitehall on energy policy.

The EU targets are challenging, but they are achievable if the government stops being afraid of difficult decisions and starts adopting a more strategic approach to energy policy on both energy consumption and the development of renewable technologies.

If we don’t get this right now, we in danger of being left so far behind our European counterparts in developing sustainable energy systems that we never catch up. Though, of course, we are still ahead of Luxembourg and Malta.