The UK’s new energy policy, sketched out on Wednesday by Amber Rudd, will keep the lights on. That’s the good news. But it makes meeting the UK’s carbon emissions targets harder and will cost energy bill payers more.
This is the result of the many contradictions it contains. Energy bills must be “as low as possible”, Rudd says, but the government is turning its back on the cheapest clean options: energy efficiency, onshore wind and solar power. Coal must be phased out but only to be replaced by gas, another fossil fuel which itself must be largely phased out within 15 years. All energy technologies must compete in a market – unless it is nuclear power.
No one could say energy policy was easy and it’s a relief to have a plan at all. Uncertainty is kryptonite to investors, and without new power plants, a dark future awaits. Since May, the UK’s energy policy has consisted solely of a concerted attack on renewable energy and green measures and huge subsidies for a new nuclear power station at Hinkley Point.
The headline today is that the UK plans to close all coal power stations by 2025. The UK is the first major economy to set such a deadline and should be applauded. Politically, it is well timed to bolster the UK’s position at the crunch UN climate change talks in Paris in December, which was being undermined by moves against renewables.
But while coal provides 25% of the UK’s electricity today, it was already set to fall to almost nothing by 2025. Rudd’s announcement also contained a worrying caveat: “Let me be clear, we’ll only proceed if we’re confident that the shift to new gas can be achieved.”
The new dash for gas reprises the push from chancellor George Osborne in 2012, which the industry almost completely ignored. Just one gas plant is being built, at Carrington (no relation). A subsidy called the capacity mechanism – payment for guaranteeing supply – was meant to entice gas plants. Instead, dirty coal and diesel generators cashed in.
So, despite Rudd’s repeated insistence that competition is vital, she is set to rig future capacity auctions for gas: “After this year’s auction we will take stock and ensure it delivers the gas we need.”
Gas is half as polluting as coal and some call it a “bridge fuel” to the zero emissions world which is needed to halt climate change. But Rudd’s policy is a bridge with no exit in sight.
The billions of pounds in subsidies for the North Sea – the UK is the only G7 nation increasing fossil fuel subsidies – and strong backing for fracking suggests the dash for gas could become a marathon.
The UK is not on track for its EU targets of 15% of renewable energy by 2020 and 50% carbon cuts by 2025, but Rudd insists the government is committed to meeting them. “Paris must deliver a clear signal that the future is low carbon,” she said. US president Barack Obama, also speaking on Wednesday, agreed but talked of going “all-in on renewable energy technologies”.
For renewables, Rudd said, competition is key: “We need to work towards a market where success is driven by your ability to compete in a market, not by your ability to lobby government.”
I asked her if the same applied to nuclear power? “We must be frank that nuclear provides the essential baseload that allows us to back renewables. At the moment renewables can’t be relied on, they are intermittent, and we need to have an absolutely secure supply of electricity for homes and businesses.” That is, in my view, a long way of saying no.
Rudd said energy security “has to be the number one priority” and, despite nuclear power’s faultless track record of rising costs and long delays, she is convinced it is both vital and viable: “We don’t just want one nuclear power station, we want more and would expect those costs to come down.”
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Rudd also said: “Our intervention has to be limited to where we can really make a difference – where the technology has the potential to scale up and to compete in a global market without subsidy.” But again this doesn’t apply to nuclear power, which has never been built without subsidy despite half a century of trying, but to offshore wind power.
Here, there was good news. Offshore wind is currently expensive but its cost has fallen by 20% in two years. By 2020, there will be 10GW of wind farms around the UK coast, providing about 10% of all electricity. Rudd said the government would support a further 10GW to be built if costs comes down further, to equal that given to new nuclear (£92.50/MWh). Renewables have to compete with nuclear, if not vice versa.
There were also positive moves on making a smart grid a reality, including changing regulations that restrict people from being offered cheaper power at off-peak times, which cuts overall demand.
But perhaps the most worrying aspect of the new energy policy is its apparent abandonment of the cheapest energy measure of all – efficiency. From 2010 to 2015, 4.5m homes benefited from government-backed energy efficiency measures and therefore lower bills. Rudd’s commitment for 2015-20 is 1.2m, almost 80% lower. Worse, unlike low-carbon heating, there was no promise of future announcements.
There is another way, a system dominated by renewables and efficiency, and Rudd herself set it out: “Some argue we should adapt our traditional model dominated by large power stations and go for a new, decentralised, flexible approach. Locally-generated energy supported by storage, interconnection and demand response, offers the possibility of a radically different model.”
Then she said: “It is not necessarily the job of government to choose one of these models.” But by backing nuclear at any price and a dash for gas, she has already chosen. Just days before the Paris climate summit aims to accelerate towards the clean energy system of the next century, the UK is harking back to the energy system of the last.
