We are living through a slow motion global energy crisis - and only clean tech can save us

20 Jun 2014


Followers on Twitter will already be aware that I spent much of Tuesday angry and bemused at BP's latest annual Statistical Review of World Energy and the quite frankly terrifying data contained therein. Although in fairness it wasn't the report that prompted my anguished response, more the staggeringly insouciant interpretation of its findings offered by BP and the selective blindness of the world's media when it comes to the long term risks the oil industry's data so explicitly exposes. As Mat Hope of Carbon Brief observed: "If only @BusinessGreen was print, i'm pretty sure we'd see @James_BG tears of frustration smudged across the page". There were no smudged tears, but I'd challenge anyone who cares about the planet and the global economy not to look at our collective willingness to ignore the challenges BP's report makes plain and not get a bit upset.

For those of you who missed BP's report - and you'd be forgiven for doing so, given that despite its explosive findings relating directly to the headline grabbing events of recent weeks, it was never going to dominate the business pages in a week in which Iraq continued to implode and Russia upped the ante in its stand-off with Ukraine - it offered a snapshot of the current global energy market, confirming that the scary long term trends the oil industry declines to talk about in public are still very much present and correct.

As I argued on Tuesday, those trends can be divided into two overarching risks - climate change and energy security - both of which BP's statistics suggest are bad and getting worse.

On the climate change front the report confirmed that following a modest slowdown caused by the financial crisis annual increases in energy use and emissions are almost back up to their 10 year average. Meanwhile, the rapid and disruptive expansion in clean energy globally is barely putting a dent in the continued dominance of fossil fuels, which was further aided by a three per cent jump in coal use last year. Clean energy may be making impressive strides, but there is no reason as yet to update BP's similarly under-reported admission earlier this year that it expects greenhouse gas emissions to rise 29 per cent by 2035, essentially condemning the world to temperature increases well in excess of 2C.

On the energy security front, the BP report is, if anything, even more of a cause for concern, at least in the short term. In a speech that sought to redefine the concept of irony, BP chief executive Bob Dudley told his audience at the World Petroleum Congress that "energy can act as a bridge" between nations. This was on the same day as Moscow turned off the taps on gas to Ukraine and Islamist militants laid siege to Iraqi oil refineries.

Dudley's central argument was that the disruptions to supplies - that he acknowledged were becoming a way of life for the oil industry - were being compensated for by increased production, primarily from the US, leading to a historically benign period of stable oil prices. As Dudley observed, the report, and its identification of stable oil prices, "demonstrates the strength of the flexible global energy system in adapting to a changing world".

But what BP failed to highlight was that those stable prices have now stayed above $100 a barrel for three consecutive years. The most important graph in the entire report shows that oil prices, adjusted for inflation, have never been higher since the Pennsylvanian oil boom of the 1860s. For three consecutive years prices have been higher than during the 1970s oil crisis and the pre-2008 boom, and all this during a period that Dudley describes as being characterised by a "stagnant global economy". If anyone ever doubted the wisdom of billionaire investor Jeremy Grantham's assertion that the days of abundant resources are over they should take a look at BP's graph on historic oil prices and the concentration of record spikes over the past 10 years.

What BP and Dudley are effectively saying is that a "strong" and "flexible" global energy market capable of "adapting to a changing world" cannot currently deliver oil at under $100 a barrel. Just imagine where a weak and inflexible market would leave us. Want to know why the global economic recovery has been so slow and fragile? There is one of your answers right there.

Of course, the trillion dollar question is what happens next? BP's press office explained its review was neither forward looking, nor included models of how it would like the world to be. But as BP's chief economist, Christof Rühl, explained the balancing act being performed by supply disruptions in the Middle East and increased production in the US is "a sheer coincidence" that cannot last indefinitely. Something has to give at some point.

There is of course the possibility that US production will continue to surge, new fields will be opened up in new regions, and the Sunnis, the Shias, and the Kurds will agree to chill out and talk about their differences. However, there is also plenty of evidence to suggest tensions in the Middle East will continue, new fields, many of which require ever higher capital costs to exploit, will struggle to keep pace with booming Asian demand, and the US shale oil boom will start to plateau. As those who warn of a potential peak oil scenario have long warned, the risk is not the oil running out, rather the flow rates failing to keep up with demand - this is basically the scenario we've seen in the last three years as prices have stayed stubbornly above $100 a barrel. It could continue for a good while yet.

Prices will no doubt fluctuate in the future, but certain market characteristics are incontestable. Traditional powerhouse regions like the North Sea are maturing fast, capital costs across the industry are soaring, demand is showing no signs of slowing, those new supplies that are coming online - the Arctic, tar sands, shale oil - are increasingly costly and high risk from both a technical and environmental perspective, and the oil industry keeps telling us it is extremely relaxed about these facts. Oh, and even if we could find a way to boost oil supplies it would only make the longer term climate risks we face even worst.

We are facing an appalling double bind. Solve the energy security crisis by boosting oil and gas supplies to such a level where we can return to the business-as-usual, low cost energy scenario that held sway throughout much of the 20th century and we might get a short term boost to growth, but we would then only serve to escalate the unfolding climate crisis.

What can be done? Faced with these realities it becomes slightly easier to understand why some in the energy industry get so animated about gas and the potential for it to provide the oil majors with the get out of jail card that some executives privately admit that they desperately need. But this fixation on gas as a saviour only makes sense if you either ignore the warnings of climate scientists or are confident you can deliver workable CCS worldwide within 10 to 15 years. To ignore climate warnings is deeply reckless and to bet everything on a CCS industry the oil and gas sector has done little to advance is the height of wishful thinking. 

Dudley's response to the various challenges the industry so clearly faces is to gloss over the energy security risks, ignore the climate risks, and offer a more of the same approach with a slight shift in focus towards gas. As he said earlier this week: "supply will need to grow to keep pace with [rising demand]. And that is why the industry is still going to new frontiers to provide the energy that the world needs - as capital discipline allows. That includes shale oil and gas, tight oil and gas and deeper offshore wells and working in the Arctic."

Or, in other words, screw the climate and trust the oil industry to do its best to keep up with rising demand, even though the last few years have shown that we're really, really struggling on that front.

Thankfully, there is an alternative response that might just work - and if you ignore the entrenched thinking and oil industry spin that accompanies the barely concealed warnings contained in BP's latest report it quickly becomes apparent that it is the only rational response. We need a global effort that curbs fossil fuel demand by replacing oil, coal and gas, with renewables, nuclear, and energy efficiency. We need much more ambitious action to bring down the upfront cost of clean energy, mobilise energy saving technologies, and accelerate the already exponential growth in clean energy deployment.

We have the technologies to achieve this and we simply need to deploy them at scale, right now. Not just because it will tackle climate change risks and deliver inordinate environmental and health benefits. But also because without it we will almost certainly have to get used to a world where oil priced at over $100 a barrel becomes less of an historical anomaly and more a depressing reality. A world where economic growth is only sustained through unsustainable exploitation of ever more expensive and destructive oil reserves in the Arctic and beneath the deep ocean. A world where control over ever more scarce energy reserves is held by the same regimes that are currently doing their best to orchestrate a 30 year sectarian war.

Fail to get ourselves off the oil hook and there will be a lot more to cry about than just BP's recklessly relaxed response to the crisis it has uncovered.

Tortured World Cup-climate change analogy alert

11 Jun 2014


I like international sporting tournaments as much as the next moderately unreconstructed, occasionally juvenile man. But unlike the true fan, World Cups, Ashes series, and Olympics tend to creep up on me, suddenly materialising like a summer storm to deliver a month-long blitz of world class athletic distraction. For me there is no season-long sense of building anticipation, my diary is not cleared, and my holiday plans are not strategically placed to ensure I will have access to a TV for the key game, having already optimistically assumed England finish second in their group and make the quarter finals. I instead enjoy what games I can, and, when I am stuck on a train as sporting history is made, make a mental note to be more organised next time – a mental note I duly forget in the intervening years.

One of the pleasures of this haphazard approach to sporting enjoyment is the freedom it gives you to marvel at how smoothly everything seems to run. Over 10 years of planning, investment, and trial runs, on the part of both the organisers and the teams, comes together for a few weeks to deliver a spectacle to hold the world's attention. It is, and here comes the tortured analogy trailed in the headline, the perfect example of the value of long term planning being harnessed in the communal interest.

And yet this year, and potentially for years to come, we have been denied that pleasant sense of surprise. In Brazil, FIFA's festival of football is overshadowed by tear gas, protests, and riots as a clear majority of the public deplore the billions of dollars ploughed into the stadia and hotel necessary to keep football's pampered plutocrats in the style to which they have become accustomed. Meanwhile, the prospects for the next two World Cups are, if anything worse.

Judging by the geopolitics that surrounded the Beijing Olympics and this year's Winter Olympics in Sochi, the most important question that surrounds the 2018 Russian World Cup is which country will Putin invade to mark the closing ceremony? If there were any justice, the death toll at the construction sites for the Qatari World Cup would be regarded as a far greater global scandal than the increasingly compelling evidence of corruption that appears to have secured a tiny country with no football history the world's most prestigious sporting tournament.

This – and here comes part two of our tortured World Cup-climate change analogy – is what happens when you lock yourself into a long term plan without thinking about the wider consequences. You start with a well-intentioned goal – to spread the reach of the World Cup or increase energy capacity, say. You believe the arguments and enjoy the hospitality put forward by vested interest and enthusiastically sign on to their investment plans. And then, when it emerges that these investment plans are loaded with risks – with allegations of corruption, rising death tolls, human rights abuses, and extreme weather impacts – you have no choice but to double down on your original decision because you are legally and financially locked into it. You have to spend billions more than expected to keep the show on the road, you have to cover up anything that goes wrong, you have to smear your critics (accusing them of western imperialism and racism is a useful canard) – and all the while you have to stick with the original plan, no matter how flawed, unsustainable, or immoral it has become.

The similarities between FIFA's ongoing descent down the rabbit hole and the Carbon Bubble hypothesis might not be immediately obvious, but one thing is clear. If you are going to make decisions where success or failure will only be determined in 10 or 15 years' time then you really have to do your homework. The temptation is always there to discount the future; to assume everything will be fine because it has been fine in the past, or because the world is unlikely to change that much over the coming decades. The temptation may even be there to take advantage of the hospitality on offer now and let the repercussions from your decision look after themselves. After all, you'll no doubt be retired by then, your involvement in the original decision nothing more than a footnote in history.

But the world does change. An increasingly educated and empowered public will not sit quietly by as crucial funds that could have been spent on health and transport are funnelled into bread and circuses, no matter how inspiring the resulting sporting circus. A public that is increasingly engaged with environmental issues will not indefinitely accept that there is no viable alternative to destructive fossil fuel extraction. Sponsors will not appreciate their brand being tainted by association with tyrants, homophobia, and allegations of corruption, just as customers will not continue to demand fossil fuels once alternatives are readily available.

Making long-term decisions without properly assessing future risk is a sure-fire way to deliver infrastructure lock-in and stranded assets. No matter what the context the likelihood is that it will leave you trying to defend the indefensible, just as surely as it will leave you trying to play football in the desert in the middle of summer.

European Election: Who deserves the green business vote?

21 May 2014

ballot box

First things first. They may be surging in the polls and dominating the headlines, but green business executives are about as likely to vote for UKIP in tomorrow's European and council elections as Nigel Farage is to make it onto the Romanian ambassador's Christmas card list.

The bulk of UKIP's hostility and contempt may be reserved for Brussels bureaucrats and eastern European immigrants, but the party keeps a healthy chunk of disdain in reserve for environmentalists and the green economy. This apparently non-racist party that just happens to include a sizeable number of candidates who keep saying racist things, may not have anything as coherent as an environmental strategy, but its aggressive dismissal of climate science, criticism of renewable energy, and opposition to effective European environmental regulations is a matter of record. As Greenpeace's John Sauven recently observed, "if you want to swim in sewage, vote UKIP". It is hard to imagine how anyone who regards themselves as an environmentalist can seriously vote UKIP this week.

That does not mean, however, that all environmentalists should be pro-European. It is entirely possible to be a staunch supporter of the green economy and fiercely Eurosceptic. Norway has shown you can be a pioneer in green investment while operating outside the confines of the EU. It may be fair to say the majority of UK environmentalists are pro-European and in favour of the bloc's relatively demanding green regulations, but there are a number of Conservatives who are simultaneously committed to the creation of a low carbon economy and a British exit from the EU. It is legitimate to argue that freedom from Brussels' red tape could help green businesses and clean tech firms innovate and grow, just as it is possible to despair of the environmental damage done by policies such as the Common Agricultural Policy.

However, if you accept these anti-EU arguments it is a reason to vote for an increasingly Eurosceptic Conservative Party led by a Prime Minister who is committed to the long term decarbonisation of the UK. It is not a reason to vote for a party that denies the need to decarbonise at all. You cannot be a serious politician and refuse to take climate change seriously, which is just one of the many reasons why Nigel Farage is not a serious politician.

But if we can safely assume that green business execs and environmental campaigners won't be voting for UKIP, who will you be voting for?

The first point to make is that you really should vote. All the polls suggest turnout will once again be depressingly low, but the fact is these elections matter for a lot of reasons, many of which relate to the environment and the health of the green economy.

On the narrow domestic front, the results of tomorrow's vote will have a major impact on the main parties' strategy in the run up to next year's general election. Will a disappointing Conservative performance convince David Cameron to tack back towards his pro-green modernisation strategy or, as appears more likely, force him to lurch even more dramatically to the right? Might a strong showing from the Green Party (currently enjoying some of its strongest poll scores in years) force Labour and the Lib Dems to try and shore up support to their left by putting forward a more compelling green offer? The final result of these elections will help answer all these questions.

More importantly though, the 73 MEPs who are this week elected to represent the UK in Brussels will have a major influence over the bloc's long term inter-locking energy, environment and economic strategies. The new in-take will have crucial decisions to make on a raft of environmental issues, and most importantly will have to soon vote on the EU's overarching energy and climate strategy for 2030. With polls across the bloc suggesting anti-European parties, many of which oppose environmental policies, are poised for a strong showing, it is critical those who want to see the EU take a more ambitious stance on climate change elect MEPs to represent them.

The question for those green business types mulling their ballot paper tomorrow is which party will best provide that representation.

As the Carbon Brief blog makes clear in an excellent recent summary of the main parties' green policy positions, the Conservatives, Labour, the Lib Dems, and the Greens (not to mention the nationalist parties of the SNP and Plaid Cymru) each boast a package of proposals that could win over green business voters. There is near universal support for an ambitious climate change and energy package for 2030, for the EU to play a lead role in international climate talks, and for the bloc to enhance its energy security through energy efficiency measures and a transition towards domestic low carbon energy.

Those voters who classify themselves as "green Tories" will be heartened to see the Party's EU manifesto state that its MEPs acknowledge the "need to secure energy at an affordable price, cut carbon in order to help prevent dangerous climate change, and reduce our reliance on any one technology or source of supply".

It remains to be seen if these welcome commitments prove sufficient at winning over prospective green voters, particularly when relations between some parts of the Conservative Party and the UK environmental movement are at a decidedly low ebb. The commitment to emission cuts coupled with the party's "long term economic" plan may be enough to secure some green business voters. But others will point to the recent attacks on wind farms, the willingness to work with Poland to boost European fracking, and the various domestic policy rows over energy efficiency and flood protection, and conclude the days of "vote blue, go green" are well and truly over. Add in the fact that a number of Conservative MEPs have a track record of voting against progressive environmental policies, sometimes even defying their party leadership to do so, and the green case for voting blue looks decidedly shaky.

In contrast, Labour appears to be edging towards offering an increasingly green proposition to the electorate. The party's European election manifesto does not provide huge amounts of detail on its decarbonisation strategy, but taken with its other recent policy pledges it is clear the opposition wants to see an ambitious EU climate strategy backed by increased low carbon investment in the UK. We will have to wait until next year to see precisely how compelling an offer Labour will put forward to the green economy, but with the party committed to a 2030 decarbonisation target, preparing plans for a new domestic energy efficiency strategy, and promising to crack down on unabated coal power there are reasons to be optimistic. Whether or not these progressive policies manage to offset on-going concerns within parts of the business community over the viability of Labour's high profile energy price freeze (and its wider economic strategy) remains to be seen, but it is clear Labour MEPs would be broadly supportive of the green business community.

The same can be said of Liberal Democrat MEPs, many of whom have a strong track record of championing environmental issues in the corridors of Brussels. However, judging by the polls it seems unlikely that their impressive green voting record and ambitious green manifesto will save them from a historically poor performance. As with next year's election, the Liberal Democrat leadership will argue, with some justification, that it has been a driving force behind the successful green policies the coalition has introduced. But sadly for Lib Dem supporters nothing seems to be able to stop the junior coalition party getting badly squeezed.

All of which leaves us with the Green Party. It may still be something of a stretch to describe the Greens as "pro-business", but the party is certainly nowhere near as anti-business as it used to be and has put together a manifesto that, while heavy on nationalisation of railways and classic tax-and-spend left wing thinking, also contains plenty of proposals on energy efficiency and clean technologies that would hugely benefit green businesses.

Of course, the party remains a long way from delivering on these proposals (a reality that would make plenty of business leaders breathe a sigh of relief), but under the EU electoral system it has the potential to send MEPs to Brussels who would push climate change up the agenda and argue for more ambitious environmental policies. It could be claimed that at times this approach has proven counter-productive, with the Green grouping at the parliament occasionally opposing compromise agreements that could have delivered progressive, if imperfect, green policies. But at a time when a number of climate sceptic parties are on the up and mainstream parties are often guilty of letting environmental issues slip down the agenda, there is a strong case for ensuring a vocal green presence in Brussels. Growing numbers of voters evidently agree with this assessment, with the most recent polls suggesting the Greens could beat the Lib Dems into fifth place.

As with any election, it is impossible to find a party that fits perfectly with your views. You could support the Greens' commitment to making climate change a national priority, but be wary of their anti-nuclear stance. Just as you could want to reward green Tory plans to focus on affordable clean technologies, and deplore the climate scepticism and anti-wind farm stance of some Conservatives. Much of the recent rhetoric from Conservative politicians may be deeply worrying for those of us who care about the green economy, but the Party, on paper at least, remains fully committed to tackling climate change.

Thankfully, despite numerous reports to the contrary, the political consensus on the green economy is still robust enough that four of the top five parties have a credible pitch for green business voters. And what is particularly encouraging about this election, is that you can vote for any of these four parties - the Conservatives, the Liberal Democrats, Labour, and, yes, the Green Party - without worrying that your vote is wasted.

Is sceptics' 'McCarthyism' spin their cleverest ploy yet?

19 May 2014

Joseph McCarthy

This much we know. Last week Professor Lennart Bengtsson of the University of Reading quit the board of the Global Warming Policy Foundation (GWPF) after just two weeks, complaining that the "enormous group pressure" he had faced from colleagues meant that were it to continue, he would "start to worry about my health and safety". He added that the criticism he had faced for joining a think tank renowned for its climate sceptic stance reminded him "about the time of McCarthy".

GWPF chair and former Tory chancellor Lord Lawson responded, accepting the resignation with "great regret" and adding that the "reference to McCarthyism is fully warranted". The Times and the Daily Mail, to name but two, then picked up on the story and elaborated on how the 79-year-old Bengtsson had, in his own words, become "most upset" when a colleague from the US resigned as co-author of a paper because of his involvement with the GWPF.

The stories were followed on Friday by a front-page splash from The Times, making serious allegations that a paper on climate sensitivity had been dismissed by Environmental Research Letters because one peer reviewer thought it would be "harmful" on the grounds it could be spun by climate sceptics to suggest there were errors in current climate projections. The story was subsequently picked up by newspapers and blogs around the world as evidence that climate sceptic arguments were being "suppressed" and that those who challenged the orthodoxy on climate science were being "harassed".

This much we also know. Later on Friday, Environmental Research Letters' publisher IOP Publishing issued a comprehensive and detailed statement categorically rejecting The Times' allegations that Bengtsson's work had been "deliberately suppressed" because it challenged climate projections. Nicola Gulley, editorial director at IOP Publishing, confirmed the draft paper had been rejected because it "contained errors" and "did not provide a significant advancement in the field". She added that "the decision not to publish had absolutely nothing to do with any 'activism' on the part of the reviewers or the journal, as suggested in The Times' article".

The publisher also took the unusual step of publishing the reviewer's comments about the paper being "harmful", which were partially quoted by The Times. Taken in context, they revealed that the reviewer's concerns centred on the belief the "the overall innovation of the manuscript is very low" and that flawed comparisons of observations based on estimates of warming and model-based estimates were like "comparing apples and pears". It was this flaw and the conclusions drawn from it that the reviewer felt was "harmful as it opens the door for oversimplified claims of 'errors' and worse from the climate sceptics' media side". In giving voice to concerns that the flaws in the paper could be spun by climate sceptics, the reviewer's wider concerns over the reports' flaws appear to have been spun by climate sceptics.

Meanwhile, requests from the Guardian newspaper for Bengtsson to provide some examples of the "enormous group pressure" that had prompted him to fear for his health went unanswered. Although late on Friday, Bengtsson did issue a statement confirming unequivocally that he did "not believe there is any systematic 'cover-up' of scientific evidence on climate change or that academics' work is being 'deliberately suppressed', as The Times front page suggests". However, he did voice concerns over a "wider trend that science is gradually being influenced by political views" and the manner in which "the Environmental Research Letters reviewer's comments suggested his or her opinion was not objective or based on an unbiased assessment of the scientific evidence".

Leaving aside the apparent contradiction presented by a scientist who opted to join a policy-focused think tank chaired by a former chancellor and funded by opaque means complaining two weeks later about the politicisation of science, the statements from IOP Publishing and Bengtsson should draw a line under this sorry saga.

IOP has made it plain the primary reason for rejecting the draft paper was due to its quality (or lack thereof) and Bengtsson has accepted the decision, even if he remains concerned by the way in which one reviewer mentioned that the flaws in the paper were ripe for misinterpretation by climate sceptics. There has been no evidence, as yet, to substantiate claims from Bengtsson and his supporters that he has been subjected to McCarthy-ite harassment and suppression (it will be fascinating to see if evidence does emerge showing that people have over-stepped the line in their criticism of Bengtsson), although it should perhaps be noted that it is possible for someone to feel harassed without any individual necessarily having committed harassment. For example, one of two colleagues informing you, even in robust terms, that they think you have made a grave error of judgement is upsetting. One or two hundred colleagues, all making the same point, would be distressing in the extreme. If this is what has happened, Bengtsson deserves some sympathy.

However, if a line should now be drawn under this hyped-up story, the likelihood is that we haven't heard the last of this incident.

I try (and often fail) to avoid writing about climate sceptic spin too often, partly because it is like pinning the proverbial jelly to a wall, but mainly because it is a distraction from the real issues: the growth of the green economy, the policies and technologies that underpin it, and the climate risks we all face. But this latest bout of spin from the GWPF and its allies feels important, as it represents an extremely clever new ploy that could prove to be the next front in climate sceptics' war on green policies and scientific consensus. Just as the previous "teach the controversy" tactic, the amplifying of the so-called "climategate" emails, and the recent focus on climate adaptation, all sought to muddy the debate on how best to respond to climate change, sceptic groups – by accident or design – have hit on a new trope that aims to deliver precisely the same effect.

By claiming that climate sceptic viewpoints are being "suppressed" and that climate sceptics are being "harassed" you effectively tar all criticism, however legitimate, with the brush of McCarthyism ultra-lite. By claiming victim status in this manner and accusing opponents of silencing them, the sceptic camp is able to pre-empt any criticism of their arguments. Moreover, the more frustrated scientists and environmentalists become by climate sceptics' misleading arguments, and the more robust they become in their criticism of the truly reckless policy proposals put forward by Lord Lawson and his supporters, the easier it becomes for sceptics to paint themselves as innocent victims of a bullying establishment.

It is a staggeringly cheeky tactic when you look at it closely. It is an insult to those brave men and women who stood up to senator McCarthy to liken the professional opprobrium aimed at climate sceptic academics with the US witch-hunts. It is an affront to those who face real suppression to argue that climate-sceptic views are being denied a fair hearing – an affront made all the more remarkable by the manner in which complaints of compromised free speech are made from the pages of national newspapers. It is pretty low to effectively accuse your critics of a lack of integrity and when they get angry about it, imply that they are bullying you. It is to be hoped that those sceptics complaining about their rights being impugned never have to face genuine injustice. 

The question, as always with climate sceptic spin, is what to do about it.

Dame Julia Slingo provides part of the answer in this morning's Times, with a plea for cool heads to prevail and for the scientific component of the climate change debate to be carried out in a professional and dispassionate manner that eschews personal attacks. The best way to deal with the scientific arguments put forward by climate sceptics is to continue to engage with them on their own merits and highlight any flaws that may emerge. It might be frustrating to be forced to re-tread ground that the vast majority of climate scientists believe is settled, but that is how the scientific method works and to date it has proved highly effective at showing how manmade climate change is happening and poses a potentially serious threat. As Slingo argues, "all scientists – no matter what their viewpoint – must be free to review and debate their research unfettered and without personal attacks".

For those of us outside the scientific community, including the business executives and politicians who must lead the response to climate change, it is critical to realise that the latest sceptic spin does nothing to alter the risk equations that define society's response to climate change.

As I've argued many times before, climate change is predominantly a risk management issue and responses are divided between reckless proposals to wait and see what happens, perhaps while making modest investments in adaptation measures, and more cautious proposals to try to mitigate the impacts of climate change and urgently adapt to those that cannot be stopped.

It is possible to find climate projections to support both of these policy responses, but several decades of research – and the largest ever exercise in scientific peer review in the form of the most recent IPCC report – have made it plain that the most credible projections demand urgent action to tackle gargantuan and escalating climate risks. No one has been silenced, the reams and reams of evidence have been assessed and the vast majority of the world's finest scientific minds continue to warn that we are facing a serious problem.

Moreover, from a business perspective it does not matter if you personally think we should take a punt on climate change not being as serious as the scientific warnings suggest, because the majority of policy makers, business leaders, insurers and investors disagree with you. There are a few notable exceptions – the Australian government, the US Republican Party, a few oil companies – but from the White House to the Chinese National Assembly and from the labs of Google to the boardroom of Lloyds of London, the desire to tackle climate risks is now firmly entrenched.

All climate-sceptic spin boils down to one central argument: that we should bet the farm, or more precisely the entire global economy, on climate change being slow enough and minor enough so as we don't have to worry about it. Any business or politician with long-term concerns knows that such irrational optimism is reckless in the extreme. The best way to disarm the sceptic spin machine is to continue to make the case that the sensible and responsible course of action is to dispassionately assess the evidence and take urgent action to mitigate the huge risks that we all face – not take a punt on the vanishingly small chance that almost the entire scientific community is wrong. It is an easy and compelling case to make, not least because tackling climate risks will simultaneously deliver a healthier, more resilient and more sustainable economy. This much we know.

Solar industry once again falls victim to its own success

13 May 2014


It will offer scant consolation to those solar developers facing the third major subsidy review in as many years, but any industry executive looking for a silver lining might reflect on the fact the latest proposed changes are a direct result of the sector's staggering success.

The drastic reduction in the cost of solar technologies - by some industry estimates solar farm costs have fallen over 30 per cent in two years - coupled with the breakneck speed with which solar panels can be installed presents a unique challenge to policymakers. A challenge Whitehall is still yet to get to grips with.

Following two previous reviews of solar subsidies necessitated by the manner in which new solar projects were being delivered so fast that Ministers' feared their clean energy subsidy budget, known as the Levy Control Framework (LCF), was being burnt through, the Department of Energy and Climate Change (DECC) has again found itself in precisely the same position - proposing cuts to solar subsidies at surprisingly short notice in a desperate attempt to take some heat out of the market.

Solar developers who are angry at experiencing their very own renewable energy version of Groundhog Day may like to reflect that DECC does appear to be getting better at this exercise the more practice it gets. Today's consultation proposes changes that won't come into effect for 11 months and promises "grace periods" for projects already in the pipeline. Moreover, this time around Minister's don't appear to proposing illegal policy changes that breach their own consultation rules. I think we can call that progress of a sort.

It is also worth noting there are legitimate reasons for wanting to keep solar subsidies under particularly tight control. The hugely admirable speed and relative ease with which you can build a solar farm or install a rooftop solar panel means that, unlike a large offshore wind farm or nuclear power plant, deployment rates can quickly accelerate in a way that would result in clean energy budgets being broken. Ministers have a responsibility to retain a high degree of budget control, not least because the LCF is not a bottomless pit of money, it is paid for through the energy bills of households and businesses and as such excessive deployment of subsidised projects could and would lead to higher bills for the public.

Moreover, the rapid reduction in the cost of solar energy means frequent cuts to subsidies are needed to ensure that new projects are not being over subsidised and delivering excessive returns to developers. By repeatedly trimming the level of support ministers can ensure more projects get support from the finite LCF budget, leading to higher levels of renewable energy and lower carbon emissions at the same cost. That is precisely why the government introduced a "degression" mechanism to ensure subsidies fell over time, but as the latest consultation suggests solar deployments can happen so quickly that these automated cuts to subsidies can still be overwhelmed.

You can argue we should be willing to pay more for clean energy, and it is definitely worth noting that according to the government's own figures the entire electricity market reform delivery plan is estimated to impose low carbon generation costs of around £76 per household in 2020, or under £1.50 a week. Similarly, the whole Renewables Obligation (RO) scheme costs households £30 a year and solar PV costs from the RO are estimated to have reached a whopping £1 a year. Costs are expected to rise, but it is from a very low base.

That said, if the last few months in Westminster has taught us nothing it is that energy bills are a politically toxic subject and any technology that can be shown to applying more inflationary pressure to bills than expected would inevitably find itself vulnerable to even steeper subsidy cuts in the future.

However, the solar industry is still largely justified in its angry response to the government's latest proposal to end access to the RO support scheme for solar farms from next April and force new solar farms to compete for support with other renewables technologies, including onshore wind farms. And it is angry. The Solar Trade Association's (STA) Paul Barwell today described the proposed changes as "alarming" measures that had seen solar "singled out for harsh treatment". Seb Berry of Solarcentury slammed the proposed reforms as "unnecessary and totally at odds with the government's desire to reduce the cost to energy bill payers of delivering the 2020 renewable energy target". Others were angrier still, privately warning that the government was on track to kill off the UK's solar farm industry.

They may well have a point. If you look at the detail of what the government is proposing today and how it fits into the UK's wider long term energy strategy it is clear that solar developers are facing a staggeringly messy and unstable policy landscape that will deal a major blow to long term investor confidence.

It seems pretty clear there will now be a continuation of the current surge in solar farm development through to April 2015. And then? Who knows.

The government's stated goal is for a slowdown in solar farm development to be replaced by an acceleration in the development of large scale solar rooftops on supermarkets, offices, warehouses, and public building. But proposed changes to feed-in tariff bands for rooftop installations that were also announced today simply promise a slower rate of future reductions to support levels, not the increase in support developers argue is needed to jolt the commercial rooftop sector out of the doldrums. Will a continued reduction in the cost of solar technologies enable the rooftop sector to take off and pick up the slack created in the industry by a slowdown in the solar farm sector? Or will both parts of the industry be hamstrung by reductions to incentives that make them temporarily financially unviable, leading to a hiatus in new development and the thousands of lost jobs and millions in lost investment that will result?

Meanwhile, the outlook for solar farms is even more murky. As of next April new solar farms with more than 5MW of capacity will have to compete for support through the contracts for difference (CfD) mechanism with other renewables projects, including onshore wind farms. The STA maintains CfDs are simply not suitable for the relatively small scale developers who dominate the solar farm sector. Moreover, while the industry thinks continuing cost reductions will allow it to compete with onshore wind farms from 2017/18 it fears it will initially be undercut by wind farm developers in any CfD auctions, again leading to a development hiatus. Will these warnings prove well-founded or will sharper than expected reductions in solar costs and policy savvy developers allow solar farm development to continue? What impact would the mooted Tory ban on new onshore wind farm development have post 2015? Could such a ban clear the way for solar farms to pick up more of the CfD contracts as onshore wind farms fall by the wayside? Again, no one knows what will happen.

As with all the other policy changes imposed on clean energy developers in recent years, this latest round of uncertainty will push up the cost of capital, undermine investor confidence, and almost certainly slow the transition to a low carbon economy. No doubt Ministers can justify the controversial changes on the grounds that budgetary concerns make them unavoidable, but concerns over the LCF budget have to be taken in context. Calculations from the STA based on the government's own numbers suggest that solar technologies will account for roughly five per cent of next year's RO and CfD budget. "Even if large scale deployment is doubled to 4.2GW this year cumulatively, solar will make up £280m or nine per cent of the 2014/15 RO/CfD budget," the trade body said in a briefing note released this morning.

The focus on budgets and costs also opens up a much wider debate, about the cost effectiveness of the energy mix the government appears to be attempting to engineer. Not only is solar staggeringly popular with a recent poll showing 85 per cent public support for the technology (and little evidence as yet to back up ministerial concerns that rural solar farms could face increased local opposition), it also boasts the fastest falling cost curve of any clean energy technology. Solar is widely expected to undercut both onshore wind and nuclear power before the end of the decade, but the chopping and changing to solar policies suggests the government is happy to put those cost reductions at risk while focusing on developing more costly forms of clean energy.

Just a few weeks after Conservative MPs signalled they wanted to bring down the curtain on the currently most cost effective form of clean energy, onshore wind, the government has now dealt a major blow to the future most cost effective form of clean energy, solar farms. Meanwhile, other more costly forms of clean energy, such as offshore wind, nuclear power, and marine energy, continue to enjoy much higher degrees of policy stability. We still need to pursue the full gamut of clean energy technologies in pursuit of the most secure and cost effective mix, but following recent attacks on wind and solar energy it is increasingly difficult for the government to pretend that it is pursuing a technology neutral, lowest possible cost strategy.

The most depressing aspect of the latest proposed changes for the solar industry is that it did not have to be this way. A package of proposals worked out in conjunction with the industry could have eased pressure on the LCF budget and throttled back the current boom in development, just as a modest increase in support could have kick-started the large scale rooftop market ministers insist they want to see. Planning rules, new industry best practices, and an increased focus on community-owned developments could have continued to restrict the roll out of inappropriately sited projects. An increased focus on energy storage technologies and R&D, coupled with a more stable policy environment, could have led to a further acceleration in solar technology cost reductions. And a renewed assessment of the government's clean energy budget that was genuinely focused on value for money would have led to the conclusion that nurturing a still marginalised solar industry would lead to a significant reduction in the overall cost of decarbonisation. No one wants to see technology wars between different sources of clean energy, but if keeping the solar industry on an even keel means rowing back support for some more costly energy sources (or better still imposing higher taxes on fossil fuels) then that might be a price worth paying.

My bet is that while the solar industry is right to be angry at the latest wave of changes, it will once again win out in the end. The technology is so popular, costs are falling so fast, and its appeal is so wide-ranging that solar will survive the current wave of disruption, albeit with plenty of collateral damage in the form of a development hiatus and the lost jobs and investment it brings with it. The government will have once again demonstrated it still does not fully comprehend the critical need to prioritise decarbonisation and accelerate investment in clean energy, but solar firms will eventually find a way to make large scale rooftop solar and solar farms work. Although, judging on past form, it is at that point that they will be hit once again by a renewed effort to hamper deployment.

Thomas Edison was right when he said, "I'd put my money on the sun and solar energy". The problem is that now we have the technologies that Edison dreamed of, constant policy changes are continuing to delay its deployment. It is worth quoting the less famous half of Edison's comment on the power of the sun and the potential for solar power: "I hope we don't have to wait until oil and coal run out before we tackle that." Sadly, we're all still hoping.