By Matt Finch
In one of the most predictable surprises of the post-election period, the new Conservative government have taken a chainsaw to various green policies, including their very own Green Deal. Also gone are the Renewables Obligation for onshore wind farms, reducing them for biomass, and consulting on whether to cut them for small-scale solar power. Why has this attack happened? To save money, plain and simple. At the same time, it was also announced that the Climate Change Levy is being extended to apply to renewable power, effectively turning it into an energy levy.
Much noise has been made of this from the political opposition (not only the Green party, as you would expect, but also from Labour and the Lib Dems), business, and the environmental groups out there, and rightly so: from a business point of view, the short-term financial impact and longer term ‘policy intent’ of this will be only negative. However, there may be some positives that come from it.
This will shake up the renewables industry, for sure. Barring dramatic changes (eg a ‘strong’ agreement in Paris that leads to a dramatic increase in the carbon / coal price, etc) we can expect to see no new community energy schemes over the next few years, and a consolidation of the current renewables industry. Onshore wind is already taking a pounding, but there are some shining lights in the gloom. Take the solar industry as an example. Ask any solar professional out there and (off the record) s/he will tell you of the cowboys in the industry. Losing them wouldn’t be a problem, but losing some of the good companies that need a bit of support for the next few years would (especially the above mentioned community energy schemes). The solar industry itself says that grid parity could be achieved by 2020, so viewed this way solar is no longer a disruptor, it’s mainstream. It may be tough to take right now, but losing government subsidies now will only result in a stronger sector in the future.
Now I’m not saying I like the fact that green subsidies have been slashed (I don’t), but they have been, so the green community needs to deal with it and work out how to adapt. The government are looking for ways to save money, from an ideological viewpoint of less government interference. If the green community presses for action that satisfies this criteria, George Osborne has to pay attention, right? After all, he is trying to balance the books and non protected government departments – including DECC – have been asked to find a minimum of 25% cost savings. Energy subsidies ARE a good place to find these – according to the IMF and ODI respectively, the fossil fuel industry benefits from an incredible £3.4 trillion in subsidies (!!) worldwide, and an estimated £1.2 billion in subsidies annually in the UK. Most of these subsidies are due to governments picking up the costs of what economists call negative externalities, such as increased health costs due to air pollution. Let’s simply start charging the polluters at source? An ‘air pollution levy’ on the primary fossil fuel burners that is transferred directly to the NHS would be a vote-winner, AND would make non-subsidised renewables instantly more attractive. Alternatively let’s talk about the UK nuclear subsidies. If you don’t guarantee a price, and you charge for looking after nuclear waste, then no new nuclear power stations will be built, thus…… making non-subsidised renewables instantly more attractive. I could go on.
The eternal optimists at 10:10 recently handed in a petition that covered exactly this. Did you know that the government sets the price that community energy schemes sell the power they make. Ie the government interferes in the market. If you’re a free market neoliberal, you’ve just shuddered in horror at that statement. All 10:10 suggested was a small change that would allow the market to work as markets should work, and allow community energy groups to sell their product to whoever they want at the best price they can.
Long and short of it? If we get fossil fuel pricing right and allow markets to work as they should, the argument over the level of subsidies that renewables and energy efficiency should receive disappears. They will be the cheapest option that also happens to be the most socially good. Win-Win.
Matt Finch spent a long time as a director of a mid-sized private sector business, but decided to jump feet first into the green world and is now trying to be part of the solution that solves climate change. Currently based in London, he holds a bachelor degree in business, and a masters degree in International Politics.