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Political confusion continues to stifle adoption of renewables


Adrian Reed

Comment: In light of recent disagreements in the UK’s Coalition Government on how much to support renewable energy subsidy schemes, Adrian Reed from international investment bank Altium warns energy policy is too important to play politics with and calls for the UK to get its act in gear.

Everybody agrees we need reliable, cheap and environmentally sustainable power. We don’t want to be dependent on foreign exports of oil or gas and the Government can’t afford or doesn’t want to pay for energy infrastructure.

The Government also doesn’t want to be seen to be making the general public – its voters – pay, particularly if that is by way of subsidies, which are never perfect.

Subsidies split opinion and can be easily turned into damaging soapboxes by a multitude of lobbying groups such as:

  • consumer groups on the cost of energy bills
  • anti-wind power Tory MPs, and
  • multiple classes of environmentalist, including bird and rural scenery protection campaigners,  or anti-oil and anti-nuclear campaigners.

When it was an easy statement to make, both the Conservatives and Liberal Democrats suggested this would be the “greenest government ever”. But when the harsh realities of government and austerity bite, the practicalities of finding a safe path to tiptoe through the minefield of an infinite combination of pressure groups is proving harder to plot.

Whatever the Government decides to do, the opposition parties and variously leaning press use it as currency to play political games, so they chose to tailor arguments and policy to their favoured audience at the time.

What the energy market and consumers really need is strong, consistent leadership from Government, ideally - though unlikely - including cross party consensus on at least its main aims and themes.

There is no perfect solution that will satisfy everybody, or even the vast majority, but some things are too important for “Opinion Poll Politics”.

Policy needs to have long-term strategy in mind. We forget that the Germans were able to do this – they now have 22GW of solar and 30GW of wind power and could turn off their nuclear plants for good in 2011.

We can no longer resort to nuclear when we think that will satisfy our needs. Since Fukushima, the Germans and their nuclear utilities (RWE and E.ON) have withdrawn from the market and the French nuclear giant, EDF, may follow suit.

Now gas is cheap due to vast quantities of easily accessible US shale gas, meaning the US now no longer imports LNG. So we switch to gas power stations and cut renewable subsidies. What will happen when Japan and many other developing nations, who are more focused on renewables but wanting coupled variable base load via gas power, do the same? Prices will shoot back up.

Shale gas and “fracking” are at best years away in the UK and

we will very quickly find ourselves dependent on larger and more expensive imports. Does anybody really think gas-fired power stations will miraculously be built in just a few years?

Renewables are not perfect. They need careful integration into the generation mix and will always need base load support. However, the power is largely free once the infrastructure is in place.

The Government (via DECC) predicting that one policy or another will result in a few percentage point reduction in consumer bills in 2030 is ridiculous. We need investment now – this, we can all agree on.

The only way this will happen is through clear, predictable and consistent policy and the acceptance that bills will need to rise to pay for new infrastructure.

With renewables, you can at least know most of the variables. Nobody knows where oil and gas prices will go - or how high.

The PV feed-in-tariff debacle killed one small but developing industry sub-sector. The Government can’t afford to do the same to wind (on- or offshore).

It must make a decision in a way that the market can’t and won’t change, then we can respond – but until then, we are in limbo.

Adrian Reed is head of energy, waste and renewables at International investment bank Altium. In the September/October issue of Renewable Energy Focus Adrian will discuss the state of the global renewables market, policy shifts, and current sentiment in the investor community. 

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