The coalition is watering down a commitment to tough new environmental emissions standards, raising the possibility of dirty coal-fired power stations such as Kingsnorth going ahead.To understand why the Coalition is appearing to slow down, one needs to understand the policy context of decisions about energy policy. A new report out by Arthur D. Little, a consultancy, clearly and concisely spells out the practical realities facing UK policy makers. The issue of decarbonization is not so much about rhetoric and good intentions, but about the facts on the ground related to technology, costs and implementation.
Green groups are aghast that a flagship policy called for in opposition by both Lib Dems and Tories, and which they last year tried to force on the Labour government, will now not be implemented in the coalition's first energy bill to be published this year.
Their criticism of the government's commitment to green issues follows news last week that nature reserves could be sold off as countryside protection measures also bear the brunt of budget cuts in the Department for Environment.
Introducing a so-called "environmental performance standard" (EPS) for power companies would have restricted greenhouse gas emissions from coal and gas plants and encouraged companies wishing to build to use more efficient technology.
David Cameron, George Osborne and Nick Clegg when in opposition; their opposition to Kingsnorth became something of a cause célèbre – and even features in the coalition agreement – but was opposed by energy companies and Tory backbenchers.
The chief executive at one coal-plant operating company warned that the UK's renewable energy technology – which would be used to help new plants meet the target – was too undeveloped to make the EPS feasible.
Now government sources confirm they will not be bringing forward legislation in the autumn and will instead spend the summer working on "the larger picture". They will open a consultation on the idea in the autumn with the results being presented to parliament as a white paper in the new year.
The report first explains the nature of the challenge:
The [UK Low Carbon Transition] Plan set out how the UK would reduce greenhouse gas emissions by 34% below 1990 levels by 2020. This is a step along the path to the much more ambitious target of an 80% reduction in greenhouse gas emissions across the entire economy by 2050. Central to the plan is increasing the proportion of electricity from renewable sources to around 30% by 2020, up from the current level of 6.2% in the first quarter of 2010.The report then explains the practical realities shaping efforts to reach the emissions reduction targets set forth in UK law:
These targets are to be met through a plethora of initiatives and incentives ranging from the Renewables Obligation and feed-in tariffs, respectively aimed at bringing large- and small-scale renewable generation onto the system, through to increasing the share of renewable fuels in the transport sector to over 5% from 2013. There is also a plan to install smart meters in all 26 million UK homes by 2020, which, together with feed-in tariffs, are expected inter alia to speed-up the installation of small-scale heat and power generation in households, and to facilitate the development of smart grids to allow better system management and enable wider distributed generation growth.
Consumers are also expected to make large greenhouse gas reductions by both significant changes in behaviour, enabled by smart meters, and further energy efficiency improvements within the home. At the same time, the Government apparently favours the widespread adoption of electric vehicles, which will add significantly to the amount of power generation capacity required, and for which significant investment in a battery charging infrastructure will be needed.
All of these measures, combined with reductions from many other initiatives in a range of sectors, are designed to help reach the Government’s ambitious targets. But governments in general tend to over-estimate the level of take-up of different policy measures. The growth in large-scale renewable generation, for example, has not been anywhere near as fast as successive government estimates have predicted, and has focused heavily on one technology, namely wind generation. This slow take-up is likely to continue, at least in the near term, and each year that passes without significant construction makes it more and more difficult to reach the 2020 targets. Recent estimates are that 7,000 offshore turbines will need to be constructed between now and 2020, nearly two per day every day of this decade. Even investors in this activity doubt that such a level of activity is achievable.The report explains that costs of all of these proposed actions are high and may not even deliver the promised emissions reductions. The report argues that new wind power costs 6 times as much as equivalent gas-fired energy (or as much as 18 times more, depending on the methods used, capital costs only). The report has this bottom line:
The rollout of smart meters will also be a Herculean task, with over 2.5 million meters having to be installed every year, from a near standing start, by 2020 at the latest. There is currently not enough capacity to install this number of meters, nor is it clear exactly what these meters will look like because there is, as yet, no agreed standard. It is also worth noting that there are different degrees of “smartness” in meters. They can range from meters that display real-time energy usage, to meters that allow two-way communication, enabling price signals to be sent to consumers or remote signalling of appliances to turn off during periods of high demand and high prices. It is not clear which level of “smartness” will be installed, although Ofgem proposes two-way communication as a minimum.
Again, there is an implicit assumption by policy makers that a large shift in consumer behaviour will occur once smart meters are installed e.g. responding to price signals and turning off appliances at times of high demand. However, there is little evidence that this will occur to anywhere near the expected degree: pilot studies may not reflect the real world. If parallels can be drawn, they would be with consumer switching behaviour in the face of energy market liberalisation. The UK has one of the highest rates of consumer energy switching, yet in a July 2008 survey Ofgem found that 44% of electricity and 40% of gas customers had never switched supplier, and that a further 44% of electricity and 31% of gas consumers had only switched once. This is despite high-profile advertising campaigns by retailers setting out how much money consumers could save, and very simple processes for switching, facilitated by internet sites.
What is really needed now will be a bitter pill for many to swallow: a slow-down in the drive for low carbon solutions.A slow-down in UK decarbonization policy with respect to the targets of the 2008 Climate Change Act is inevitable. I do the math in this paper. In that paper, written in early 2009, soon after the Act was passed as law, I wrote that the UK would need to achieve the 2006 carbon efficiency of France by no later than 2015 if it was going to be on track to meeting its short-term emissions reduction target (France was at 0.30 in 2006, compare with implied decarbonization of the UK economy shown in the figure from the paper below). I concluded that:
The failure of the UK Climate Change Act is yet to be broadly recognized, but when it is, it will provide an opportunity to recast carbon policies in a more effective manner.