You would be forgiven for feeling confused. On one hand there are yet more credible reports highlighting the unanswerable wisdom of green growth and sustainable economic development, and on the other there are yet more warnings about the escalating climate risks we face and the deeply flawed environmental policies we are lumbered with. In the past week the cognitive dissonance with which everyone working in the green economy lives has reached deafening levels.
The landmark New Climate Economy report, released today and backed by a battalion of leading economists, financial institutions, and businesses, provides the most compelling insight to date into how we can decarbonise the global economy in a way that actually helps us meet other economic goals such as development, security, and poverty alleviation. Its findings largely echo those of the UK-wide analysis published last week by WWF, which similarly showed how decarbonisation and economic growth are not only compatible, but extremely desirable when you consider the health and security benefits that are often ignored through narrower economic impact assessments.
And yet these encouraging bookends to the past week bracketed the usual flurry of deeply depressing environmental stories. New figures confirm global concentrations of atmospheric carbon dioxide are higher than ever before and there are worrying signs that emissions are spiking again as the global economy recovers. At the same time, a major new study by those notorious hippies at PwC reiterates yet again that the pace of decarbonisation is nowhere near fast enough to avoid dangerous levels of climate change. Meanwhile, at a national level, MPs are slamming the government for failing to deliver on green promises and analysts are warning the renewables investment climate is worsening.
All of which raises some important questions: if the economic benefits of aggressive action on climate change are so self-evident – and there is a growing body of credible evidence to suggest they are – why are we still failing to take the necessary action? How can politicians hymn the need for climate action one minute and promise to build a nation on maximised oil production the next? How can businesses identify climate change as an existential risk and pledge to invest in developing a technology-led response and then reportedly fail to deliver on those investment pledges?
With next week's People's Climate March and UN meeting in New York and Naomi Klein's high-profile new book on climate risk about to be released, climate change is enjoying one of its periodic media "moments" and as such there are plenty of potential answers to these crucial questions doing the rounds. They range from Klein's contention that the current neo-liberal capitalist system is incompatible with effective action on climate change to the charge that we simply face a failure of political and business leadership and as such the right mix of leaders can deliver the carbon pricing and clean technologies we urgently need within the current economic framework. Consequently, we face a similarly wide spectrum of recommended courses of action, ranging from (peaceful) revolution to one last push to prove the viability of clean technologies and ensure green economic arguments win out.
For what it is worth, my view is that the main stumbling block remains our deeply vexed relationship with long and short termism. You may wish to contest some of the New Climate Economy's claims that green growth is more cost effective than business-as-usual, but it is impossible to contest the evidence that shows energy-efficiency measures and agricultural best practices deliver massive savings, higher yields, and economic benefits. We've always known this, and yet we still live in a world where billions of dollars' worth of energy and food are wasted every month. Why is this? Because there are always more pressing short-term problems to deal with before you can get around to insulating the loft or installing better irrigation systems. It is the exact same 'put it off until tomorrow' mentality that sees a country neglect constitutional issues for generation after generation, until part of that country decides it has had enough and suddenly converts those self-same issues from a long-term to a short-term concern. Yes, we're talking about you, Scotland.
Overshadowing all these arguments is the rarely acknowledged reality that decarbonisation and climate adaptation is so staggeringly hard to deliver. Some environmentalists are occasionally guilty of forgetting that we are talking about the rapid re-organisation of an entire global economic and technological system. It is remarkable this even needs saying, but decarbonisation is not a small undertaking. In fact, it is unprecedented in its scale and complexity. There are encouraging precedents for drastic socioeconomic change, but none faced the intricacy of a modern global economy, nor quite such an imminent deadline.
What is so interesting about the New Climate Economy report (and, in fairness, other recent reports on green economics such as last week's WWF report) is that it understands this complex context and doesn't simply re-tread the arguments in favour of decarbonisation, instead focusing to a large extent on how best to deliver this transition. And it is in its framing of the next 15 years as a succession of choices between high and low-carbon development paths that the report is both at its most compelling and has the greatest resonance for business leaders.
According to the report, $90tr (£55.5tr) will be invested through to 2030 in new urban, energy and land use infrastructure and our ability to avoid dangerous levels of climate change depends on the choice we make between investment in new clean technologies or investment in the dirty technologies of the past century. Inevitably, the technologies of the past century are cheaper up front, but they are also less functional and fail to deliver the long-term savings and benefits offered by clean technologies. We are being asked to choose between an iPad and a second-hand typewriter from a charity shop. Or, to make the analogy more explicit, between ultra-efficient LED lighting in your office or traditional strip lighting. In this context, it is remarkable that so many of us are continuing to make dumb choices.
As the report makes plain, "business-as-usual" is an illusion. The past is not always the best guide to the future, new technologies and risks means economic and development models can and do change. There may be reassuring comfort in investing in technologies and infrastructure that worked in the past, but faced with a choice between a cleaner, better and more cost-effective technology and a polluting and insecure incumbent technology, no rational person would opt for the status quo. The New Climate Economy report crystallises the realisation that many political and business leaders have made in recent years that a greener economy is not just greener, but better.
Of course, the necessary low-carbon investment choices become a lot simpler if the cost of clean technology continues to fall and if governments deliver effective and stable decarbonisation policies backed up by consistent rhetoric, and as such green businesses must continue to increase investment in clean tech R&D and lobby long and loud for better policies. But the report makes it blindingly clear that the right choices can and should be being made now in cabinet rooms and boardrooms around the world, not least because in the short and long term green investments deliver better returns for all. Greener city-planning makes sense, more sustainable agricultural practices make sense, switching off coal-fired power stations makes sense, just as more efficient offices, electric vehicle fleets, and onsite energy generation make sense at an individual business level.
The contradictory developments that dominate environmental headlines may be confusing, but make no mistake, the arguments in favour of the green economy are being won, as the World Bank, the IMF and the vast majority of the world's governments and multinationals now accept. For all its complexity, the climate change challenge now for business leaders is simple: they need to make the right choices.
08 Sep 2014
Something has happened that I never thought would. Against all my expectations, prejudices, and better judgement I have become a partial vegetarian, or, to use the style magazine vernacular, a 'demi-veg'. I know, if you are playing a game of environmentalist bingo, that sentence has probably just helped you win.
This development surprised me for many reasons. Firstly, if I have a hobby it is cooking and like many (but by no means all) foodies I'd argue there are few things more satisfying than a medium-rare steak, or a hunters stew, or a chicken jalfrezi. My kitchen skills are nowhere near advanced enough to trouble the judges on Masterchef, but I know how to chop an onion, I know you never undercook chicken or overcook vegetables, and I know that people who don't cook with chilli and garlic value decorum above pleasure and are probably not worth knowing. Consequently, I'd also picked up the prevailing kitchen culture belief that a meal without meat is in some way lacking.
Secondly, I grew up in the semi-rural hinterland that is East Anglia, surrounded by fields filled with animals that would make it onto your plate and the sound of shotguns taking out those pheasants that hadn't already fallen foul of the traffic. The complaint that children don't know where their food comes from would have held no sway in north Essex in the late 1980s, where classes were routinely granted a tour of the chicken sheds on the edge of the village and my father and I would each autumn pick up a quarter of a cow from one of the local farmers. I'm aware this invites the condemnation of true vegetarians, but I made my peace with the moral questions presented by meat-eating long ago and am still yet to be convinced by the arguments against an omnivorous diet.
Thirdly, my sister ended up making a different ethical choice and embraced vegetarianism for about a decade, and as a result I've dabbled with a vegetarian diet on many occasions over the years. Whenever I undertook such an experiment I quickly found myself both bored by food and reflecting on the wisdom contained in Paul Weller's reported response to a question about why he gave up on vegetarianism: "Because I was fed up being bloody hungry".
In short, I was in no way a receptive audience to the launch of the Meat Free Monday campaign five years ago. So what changed? How did I go from vegetable-sceptic to someone who on average eschews meat at least once, and more often three or four times, a week? Why have I shifted from being ambivalent towards the Meat Free Monday campaign to today being comfortable signing up to their new Climate Pledge?
Like any successful shift in behaviour it was driven by a number of factors. The initial launch of the Meat Free Monday campaign played a part, providing a once a week template that was far less restrictive than the all or nothing challenge presented by full vegetarianism. But it was reading Jonathan Safran Foer's Eating Animals in 2009 that really provided the trigger for the gradual change in my diet. I remained largely unmoved by the philosophical arguments against animal-eating, but the full scale of the environmental impacts Safran Foer documented did spark in me a desire to curb the environmental footprint of my food.
And yet it was not until about 18 months ago that this desire manifested itself in a genuine and consistent shift in behaviour that has seen my wife and I drastically reduce the amount of meat we eat. This tipping point was informed by a number of factors - a pre-wedding desire to lose a bit of weight, a realisation that food price inflation was making the weekly shop an ever more expensive undertaking, the nagging sense that here was a way to slash my environmental impact - but the real trigger was remarkably prosaic: we found a couple of decent cookbooks.
The combination of one vegetarian cookbook and one Indian cookbook that was dominated by veg (and seafood dishes) demonstrated that good home-cooked vegetarian food was possible. After all, why wouldn't you want to eat a paneer and pepper curry or a vegetable chilli? From that point on, one, two, sometimes even three days a week of meat-free meals have become the norm in our house.
The benefits have been myriad. We're healthier, I've become a better cook (making food interesting and tasty without meat means you have to get cleverer with the use of spices and embrace a wider range of food cultures - again, if this time you are playing middle class bingo, you're welcome), we've saved money, and the environmental benefits have been huge. As Greg Barker noted this morning at the launch of the new Climate Pledge campaign, shifting to a meat free diet one day a week can deliver a carbon emissions saving equivalent to taking a car off the road for a month.
Most of all though, I enjoy food even more than I did before. By broadening our diet we've not only discovered that there are ways to make meat-free meals enjoyable, but we've also ended up enjoying meat-based meals more. Partly this is because we're lucky enough to be able to use the money saved through demi-vegetarianism on better cuts of meat, but mainly it is because you savour a fillet of steak or sea bass more when it is an occasional treat (I know, forget bingo, my Insufferable Urbanite Foodie Top Trumps score has just gone through the roof).
Are there any wider lessons to be learnt from this experience? The answer is yes and no. As a topic food is hugely political, but it is also hugely personal. I'd be extremely wary of advising anyone too forcefully about what they should eat, partly because it is rude and partly because, as my previous opposition to vegetarian activists demonstrates, it just serves to alienate people. Thanks for reading this far, but ultimately my diet choices are of little concern to anyone but me, and that is precisely how it should be.
But equally, I'm not sure the behaviour change that has happened in my kitchen is particularly unique. As with most issues in life, there is a natural resistance to proscriptive all or nothing proposals and a much greater willingness to embrace incremental change. That is why Meat Free Monday is more attractive than full-blown vegetarianism, and why a balanced diet that simply trims levels of meat in general and red meat in particular is more attractive than both.
There is a big lesson here for campaigners as they seek to find a way to successfully address a massive source of carbon emissions that they have previously shied away from tacking for fear of being characterised as mung bean-eating killjoys. And there is also a lesson for businesses and food retailers, in so much as if you are going to address environmental impacts in every other part of your business there is an obligation to address those environmental impacts related to the food you supply, be it through a supermarket chain or a small staff canteen.
The reality is that if we are going to try and tackle the carbon footprint of meat it seems self-evident that a big bold commitment to aggressively promote vegetarianism will only alienate customers and employees. The more sensible approach has to be a gradual shift, properly communicated, that offers better meat-free options, favours lower carbon meat dishes, and ensures the cost and environmental health benefits that come with his approach are explained to customers. You could also start by asking if the Meat Free Monday Climate Pledge could work for your organisation? You never know, you might end up surprising yourself with how easy it is.
Equally, as with every other aspect of the low carbon transition from green energy tariffs to electric cars and solar panels to energy efficient appliances, the key often lies in making the green option attractive and easy to embrace. It is a simple lesson that is too often forgotten when businesses and NGOs seek to promote the latest clean technology or green activity. A decent cookbook is often worth a thousand green celebrity endorsements.
Picture the scene. Two months after launching a car scrappage scheme to boost the auto industry the government halts the fund with immediate effect. That decision comes just a few months after the government takes a funding scheme for green cars that had been in the pipeline for years and had been the basis for multi-million pound investments in new manufacturing capacity by Nissan, Ford, and Mitsubishi, and cuts it in half, declaring the whole policy was "crap" in the first place. Meanwhile, a new government-backed car financing scheme gets off to a woeful start and the adverts attempting to promote it get banned by the advertising watchdog.
Imagine the response. The resulting job losses would be splashed across the front pages of the papers, the letters pages would be filled with indignant CEOs threatening to take their manufacturing investment elsewhere, questions would be being asked in the House, judicial reviews would be being readied, and somewhere Ed Miliband would be calling for an independent inquiry.
It is no exaggeration to suggest a version of this hypothetical scenario is precisely what has happened to the insulation and energy efficiency sectors. The industry was told in no uncertain terms by Ministers to scale up to deliver the national rollout of energy efficiency retrofits that is essential to tackling scandalous levels of fuel poverty and ensuring the UK meets its greenhouse gas emissions targets. And then it had the rug pulled out from under it because David Cameron thought it might win him a handful of votes.
The ridiculously short-sighted decision by Ministers to tackle high energy bills by cutting the energy efficiency schemes that provide the only sustainable means of cutting energy bills was always going to have a severe impact on the insulation and energy efficiency sectors, but now the chickens are really coming home to roost in the cold and draughty coop.
The fact that the insulation sector is dominated by small businesses means it is impossible to know precisely how many jobs have been lost as a result of the changes to ECO and the continued failure of the Green Deal scheme to deliver the anticipated levels of demand. We cannot verify whether the UK Association for the Conservation of Energy was right when it predicted the government's surprise policy changes late last year would result in 10,000 job losses and 7,500 new jobs foregone. Equally, there is no way of knowing if the government's prediction that, despite a little unfortunate turbulence for the industry this year, there will be 35,000 people working in the insulation sector in 2015/16 will prove accurate.
What we do know is that around 600 jobs have gone this summer at Domestic & General Insulation as a direct result of the government's policy choices, and a further 670 people are now facing redundancy at Mark Group. Many other smaller companies have also laid off workers who they had hired after the government talked up the demand that would be created by the ECO and Green Deal schemes.
We also know the current spike in demand for Green Deal financing schemes still leaves levels of demand far below that which was originally envisaged, just as we know much of the recent interest was driven by a grant scheme that was so crazily generous the £120m fund was burnt through in a matter of weeks. Cheerleaders for the Green Deal insist once this pipeline of heavily incentivised work has been delivered the momentum in the market will continue, and there is no doubt the Green Deal market is in a much better place than it was this time last year. However, plenty of the people working in the market remain unconvinced that the current jump in Green Deal numbers is anything more than a pre-election blip created by £120m of government largesse. The Green Deal may be making much-needed progress, but no one in the industry, nor in Westminster for that matter, has the faintest idea what will happen to it after the next election.
The other thing we know is that the Big Six energy companies are building up a sizeable windfall as a result of the byzantine detail contained in the ECO reforms, which allowed them to fund the upgrade of even fewer homes than originally planned. DECC insisted a couple of months ago that it was keen to address the issue and had invited the energy companies to explain what they would do with the windfall, but as yet there has been no confirmation on what, if anything, will be done.
The final thing we know, indeed have always known, is that energy efficiency measures are the most cost-effective means of tackling fuel poverty, reducing energy bills, enhancing energy security, improving public health, and cutting carbon emissions. The Committee on Climate Change argues that domestic energy efficiency is essential to hitting our carbon targets, just as fuel poverty campaigners argue it is the only way of dealing with the national disgrace that is our cold-induced winter death rate. The benefits of upgrading the UK's building stock are so blindingly obvious that this should be the one aspect of decarbonisation it is easy to get everyone's agreement on.
The auto industry, the finance industry, the utility sectors, none of them would ever have been treated like this. But the diffuse nature of the energy efficiency sector and the voiceless nature of the fuel poor has allowed this most important of issues to fall victim to the most craven example of political short termism.
The ECO scheme was anything but perfect, and yes, it is vital that Ministers always keep a close eye on any scheme that is funded by billpayers. But if the government wanted to change the schemes it required measured and timely reform in proper consultation with industry, just as would be offered to more glamorous parts of the economy. Instead, many of the people who should be delivering the home improvements the UK desperately needs are now facing redundancy as a direct result of the government's knee-jerk response.
For all the damage done by this boom and bust cycle, the election provides a natural opportunity for a fresh start. The Green Deal scheme or some alternative based on energy efficiency finance models may, with proper regulation and incentives, yet deliver significant improvements. Designating energy efficiency as a national infrastructure priority would allow ministers to fund energy saving measures in the same way they are funding more costly new energy generation infrastructure. For clear political, economic and environmental reasons, all three main parties should be making energy efficiency policy a priority as we head into the winter.
And yet David Cameron continues to create the impression he has not given energy efficiency policy a second thought since he took the axe to a scheme that was crucial to both the warmth and well-being of thousands of fuel poor households and the prospects of an entire industry. He should not be allowed to forget that his policy mis-management and short-termism has had truly "crap" results for those businesses who trusted him when he said he wanted "to make Britain the most energy efficient country in Europe".
It's happening, people. On Sunday, one out of every five light bulbs in your home was powered using wind energy. If you own three TVs and two games consoles (you know who are), one of those was powered using wind energy as well. You would need 10 light bulbs to find one that was powered using coal.
This surge in wind power was the result of particularly favourable weather conditions, but this weekend was not quite the anomaly its record performance suggests. According to new government figures, renewable energy generation was up 43 per cent during the first quarter of the year, meeting nearly a fifth of demand. Yes maths fans, you're right, that means every fifth light bulb was lit using renewables during those cold winter months.
Meanwhile, in Spain, comfortably over a third of power came from renewables during the first half of the year, while more than half came from low-emission sources once nuclear power's contribution is added to the mix – that is every other TV powered using zero-emission electricity. The picture was similar in Germany where coal generation fell during the first half of 2014 as renewables output soared to account for 28 per cent of the power mix – you can do your own light bulb calculations now. Even in the previously fossil fuel-addicted US change is afoot with a new government report detailing how close to five per cent of power now comes from the country's fleet of wind farms.
Something truly remarkable is happening. Renewables are working; in most cases even better than their advocates suspected was possible. The share of clean energy on the grid in many of the world's most powerful economies is increasing at a rapid clip, and all without the blackouts or serious technical challenges critics predicted. The idea of a renewables-dominated energy future is no longer the sole preserve of eco-activists, in fact in some influential quarters it is becoming close to orthodox thinking. Renewables are now part of the mainstream, statistically, conceptually, and politically.
Moreover, while the build-out phase for renewables coupled with a scandalous failure to tackle coal power across Europe meant there was initially little impact on emissions from the power sector to show for clean energy investment, there are now increasingly encouraging signs renewables can and will start to replace fossil fuels. There is now plenty of evidence to show you do not need backup fossil fuel power to cover every megawatt of renewable capacity you add to the grid, as well as proof that each MWh of clean energy generated helps avoid emissions that would otherwise have been released.
Of course, supporters of renewables need to be wary of any triumphalism sparked by this flurry of record performances, hugely encouraging as they may be. The renewables industry's recent progress comes with a lengthy caravan of caveats trailing in its wake.
First, the string of broken renewables records across Europe over the past 12 months are the result of both increased capacity and a remarkably wet and windy winter that gave a boost to both wind and hydropower output. Renewables' inherent intermittency issue remains present and correct, prompting the perennial question: what happens during a dry and still month? The answer, obviously, is that some backup power capacity is needed, be it through standby power plants, cutting-edge demand management technologies, or interconnectors to neighbouring regions where the rain is reliably falling and the wind is almost always blowing (or Ireland as it is otherwise known). The complexities of the energy market and the power of the incumbent suppliers in turn mean further incentives are needed to ensure they build this necessary backup capacity, resulting in a quasi-nationalised energy market where the absence of a strong carbon price means we subsidise clean energy generation and backup energy generation.
Second, the intermittent nature of renewable energy output also necessitates balancing payments, where wind farm operators, for example, are paid compensation to not generate power when peaks in supply cannot be matched to peaks in demand. You do not have to believe that wind turbines are the work of the devil wreaked on the English landscape as punishment for our immoral lifestyles to accept this is a frustratingly inefficient arrangement.
Third, the cost of virtually all kinds of renewable energy may be falling fast, but for as long as climate and health externalities associated with fossil fuels are kept off the books, cost concerns over clean energy alternatives will remain. The initial build-out costs for the renewable energy infrastructure that is now delivering record levels of output has pushed up energy bills (albeit not by as much as its critics claim) and that has created challenges for manufacturing industries and those living in fuel poverty. Although it is worth noting that the Telegraph reports today that the same British manufacturing industry that has spent several years warning it will be crippled by high energy costs is now lauded as the "lowest-cost manufacturing economy in western Europe".
Finally, regardless of your views on the aesthetic merits of wind turbines and solar panels, renewables have brought with them land use impacts that cannot be ignored. Whether it is wind farms changing the vista of upland landscapes or biomass power plants requiring fuel from local forests, the clean energy generated by renewables projects come with varying land use demands. Fossil fuel power plants obviously also impose their own land use demands, but the high energy density of coal, oil, and gas mean it is possible to argue they require less land, even if they bring with them much higher environmental risks overall through spills and climate impacts.
And yet nowhere is the arrogance of the anti-renewables commentariat more apparent than in its willingness to trot out this list of challenges as if no one in the green economy has ever thought of them. Not only is the renewables industry acutely aware of each and every one of these issues, it is also closer than ever to overcoming them.
Pilot projects from around the world are demonstrating how a combination of demand management technologies, increased energy efficiency investment, interconnectors, and smart grid functionality – essentially harnessing the computing power we now use to look at videos of cats falling off skateboards to drag the power grid into the 21st century – can all but solve renewables' intermittency issue. Add the fascinating work being done to deliver cost-effective grid-scale energy storage technologies into the mix and it is possible to see how a renewables-dominated future is not just a pipe dream. We are one technological breakthrough away from making a cost-effective 100 per cent emission-free grid a reality. And as the IT industry has shown, we now live in a world where technological breakthroughs can be deployed at a pace much faster than was ever possible in the past.
Energy storage and smart grid functionality, both of which could feasibly become the norm within the next 20 years, also help address the cost challenges that renewables face. Allowing us to make use of every MW generated by a wind or solar farm and release it when we want it will drastically cut the cost of clean power. Although it is worth noting it is already falling fast without the help of next-generation storage technologies. Just as you would expect with a maturing technology-based industry, the cost of renewables has fallen drastically – so much so that some parts of the world are now seeing renewables compete with fossil fuels on price without recourse to either subsidy or carbon pricing. It is a trend that is only going to continue, as solar PV efficiencies in particular quickly improve.
Land use remains a challenge for renewables, and there is a credible and compelling argument for developing carbon capture and storage (CCS) technologies and next-generation nuclear power plants in order to take advantage of the high energy density these fuels can offer. But even here we are starting to see how community-scale wind and solar installations, not to mention floating wind and solar farms, can deliver renewable power without disrupting current land uses. Moreover, when asked, the vast majority of people still prefer a wind farm in a field to coal dust in their lungs.
I fully accept this analysis is more than a little Panglossian: global emissions are still climbing, renewables still make up a tiny share of the energy mix globally, and most experts agree the most likely course of action remains an extremely gradual transition towards a clean energy grid. But then again, there are a couple of graphs doing the rounds on Twitter comparing the wind and solar deployment predictions for the past 10 years or so from Greenpeace and the IEA with the real-world performance. Both predictions are too conservative, Greenpeace's fractionally, the IEA's massively. There is mounting evidence the energy incumbency could be getting its projections wrong again. Renewables costs are falling, barriers to its wider deployment look surmountable, and as the flurry of recent records prove, the technology is working.
The transition will continue to be messy. There will be years when renewables' performance falters, just as there will be markets where support is withdrawn too quickly, damaging the industry, and markets where support is clung on to for too long, damaging the industry's credibility. There will be an even fiercer fight back from the fossil fuel lobby than the one we have already seen. The renewables industry will face significant challenges as it scales up and battles to ensure the supply of new technologies matches soaring demand. But it would take a particularly one-eyed assessment to deny that a renewables revolution is under way. The records will keep tumbling. It really won't be that long until every light bulb is lit using clean power.
Almost everyone loves the concept of community energy. Right wingers love the air of old time self-sufficiency and autonomy that comes from a community owning and generating its own power. Left wingers love the co-operative element that underpins the funding of many community projects and the challenge the model presents to corporate power. The government loves the combination of clean energy, 'Big Society' thinking, and the potential for challenging the Big Six's dominance. Environmentalists love the boost to the UK's renewable energy capacity and the ability to engage communities with green issues. And even some within the energy and finance mainstream are starting to love the ability of community projects to help repair the battered reputation of the investment and energy sectors.
So why are proposals for community energy projects currently being rejected by the Financial Conduct Authority (FCA)? And why are senior figures within the fledging community energy sector increasingly concerned that the government is failing to live up to its ambitious new community energy strategy?
As The Guardian revealed today, the FCA has recently rejected around eight applications for the creation of energy co-operatives owing to an interpretation of arcane regulations governing how an organisation qualifies as a mutual that means they fail to qualify. According to the rules, a co-op must demonstrate that members are participating in the mutual through "buying from or selling to the society", "using the services or amenities provided by it", and "supplying services to carry out its business". This is, of course, easy for a co-operative retailer or bank that sells its services to its members, but according to the FCA it rules out some proposed energy co-operatives.
Well, yes, you could interpret it that way if you wanted to choke off one of the most promising developments in the energy sector in decades. Or you could recognise that anyone investing in a community energy project who then also consumes power from the grid is to some degree buying energy produced by the project. It may be a fractional amount, but if the power is being fed into the grid you can make a case that the co-operative member is using some of it, even if they are not sourcing it directly from the wind farm or solar array they have helped finance. Through their energy bills they are also funding the Feed-in Tariff that helps fund the vast majority of community energy projects.
As Shadow Energy Minister Tom Greatrex, Mark Lazarowicz MP and Claudia Beamish MSP pointed out in a letter to the FCA: "We understand that there has been some ambiguity about the meaning of the word 'participation' in ascertaining whether a project is a bona fide co-operative. Participation is clearly more than just a narrow question about whether the product of the co-operative is traded solely with members... There may be other forms of participation that the FCA has not considered. So long as this question remains open, we do not believe that the FCA can reasonably move to block future co-operative energy projects."
It is hard to argue with this logic and hard to see how the FCA can think the rules were meant to be interpreted in this way. It is critical that the emerging community energy sector is properly regulated and financial risks are effectively managed, as one collapsed energy co-operative would inflict untold damage on the sector as a whole. But the current interpretation of the rules would reduce this growing sector to the handful of projects that are able to sell power direct to their members. Getting a community energy project is hard enough as it is, what with planning challenges and tough financial regulations, but this is just another barrier being thrown up in the way of viable clean energy projects.
Energy and Climate Change Secretary Ed Davey needs urgently to clarify these rules and make it clear that energy co-operative members do not have to buy power direct from the project to be 'participating' in the mutual.
He should also take this opportunity to reflect on whether the government really is doing all it can to make community energy a serious player in the UK. The government's recently published strategy talked a good game, but there are already serious concerns within the sector that a promised increase in the Feed-in Tariff threshold to help aid the development of community-scale projects could be shelved.
Equally, the FCA's concerns would prove academic if the government's much-trumpeted Licence Lite regime and its promise of making it easier for community energy projects to sell power direct to customers was delivering. Allowing community energy projects to cut out the middleman would only serve to connect people even more closely with the green energy they are using, but the scheme has singularly struggled to get off the ground.
It would also be worth asking what has happened to George Osborne's promised Green ISAs - the strangely abandoned proposals that could have proved one of the simplest and easiest means of mobilising green investment and driving public interest in low carbon infrastructure.
Almost everyone loves community energy. But love alone is not enough: government and regulators now need to follow up their warm words with action.
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Previously known as the BusinessGreen Blog, James' Blog features musings, observations and occasional rants from BusinessGreen editor James Murray