Environment Secretary Chris Huhne has poured scorn on the Labour Party’s record on climate change and on promoting low carbon energy. For most of the last Labour Government’s 13 years in office, he had a point. Many Labour backbenchers were equally disappointed with the record until the formation of the Department for the Environment and Climate Change under Ed Miliband as Secretary of State. At that point, things changed for the better and stepped up a gear. The huge importance of decarbonising the generation of electricity as part of the response to climate change was recognised and changes in policy were implemented.
Huhne has vowed to accelerate progress and make the coalition the greenest government ever. However, for all its bluster on the environment, the coalition has not made any meaningful advances. Indeed, it has actually delayed progress in greening the energy economy.
While Huhne is right to identify the conditions of the current energy market as a barrier to progress in deploying renewable energy, he is not the first to recognise this. The problem was clearly understood by Labour’s environment ministers, who introduced a consultation on the energy market which would already have delivered significant changes if the result of the 2010 general election had been different. The coalition has delayed the process by at least a year and probably two. The latest statement and consultation paper on energy markets shows all the characteristics of civil service procrastination.
The paper places great reliance on investment in renewables being driven by a rising price of carbon. At present, the only mechanism for setting a carbon price is the European Union’s emission trading scheme, which will take years to have any significant impact.
The real obstacle to progress has not changed. The Treasury, which dragged its feet and held Labour back, now seems to be doing the same to coalition ministers, who do seem to understand the problem, if not the urgency required in dealing with it.
The effect of investment in renewable energy is not immediate. There is at least a three-year period required for delivery. And before a development project such as an offshore wind farm can begin to show dividends, the necessary investment has to be committed. Such investment is possible for offshore wind, with the incentive of double renewable obligation certificates, but wind is a mature technology with little further scope for reductions in capital costs. Under present conditions, no other commercial scale technology can attract investment. If this country’s potential for achieving low carbon energy and massive industrial benefits from superb natural marine energy sources is to be realised, there needs to be a clear and immediate signal to investors that emerging technologies can be made commercially viable.
Energy sources such as as wave and tidal power are inevitably more expensive at their current stage of development. As with any product, large-scale manufacture and production engineering refinement are essential to reach competitive capital cost levels. At present, both wave and tidal stream generation are dead in the water. Neither is getting the necessary investment for the first wave of farms, since their current capital cost means there would be a loss to investors.
This is the problem that the Germans and the Danes identified. In the 1980s, Germany’s SDP government established the feed-in tariff regime, thereby guaranteeing the price of electricity generated by renewable technologies depending on their stage of development. This mechanism provided a market “pull”, enabling the deployment of new technology that should become progressively cheaper with larger-scale manufacture, the establishment of supply chains and further development.
The regime has been a great success in Germany, with the creation of about 250,000 jobs in renewable energy and a turnover amounting to billions of euros. The Germans will be exporting wind turbines to this country.
Given that Britain was leading the way in wind power technology in the early 1980s, it is clear that Margaret Thatcher presided over a massive missed opportunity.
With the current British lead in marine generation technologies and as we possess arguably the best raw natural energy resources in wave and tide around our shores, Britain is uniquely placed to advance a genuine green industrial revolution. This would create wealth for the nation, many thousands of jobs and make a massive contribution towards tackling climate change. Unfortunately, this is another opportunity that will be lost unless the Conservative-led Government acts fast. In order to survive, the small companies which have developed the technologies will be forced to go wherever the market and investment will support them. Inevitably the country where the support is available, say Canada or China, will reap the benefit of what these technologies have
to offer.
Sadly, the coalition has even pulled back from the Labour commitment to a £2 billion green investment bank, reducing it to £1 billion at some time in the future. This will have little or no effect unless the market is modified. No doubt the Treasury will insist on some rate of return on investments and at present these are simply not to be had for new renewable technologies. The green bank, if it ever becomes a reality, would be just as wary as commercial investors are now.
The danger is that Britain will be left in the position of a client if we wish to exploit our wave and tidal resources in the future, importing the necessary machinery with no benefit to our economy.
If that happens, the coalition claim to be the greenest government ever will be as hollow as the rest of its promises. In the best Liberal Democrat tradition, its ministers are happy to claim credit for policies introduced by the previous Government while at the same time delivering less than Labour’s plans would have done.
Des Turner was Labour MP for Brighton, Kemptown from 1997-2010
