21 Oct 2015, 16:49
We can only hope the eventual quality of the engineering will be higher than the quality of the debate that swirls around the controversial Hinkley Point nuclear project.
On one side of this long-running argument, anti-nuclear campaigners remain implacably opposed to everything to do with the project and are currently digging out the padlocks and superglue as they prepare for a last ditch attempt to stop the plant being built. Hinkley Point is too expensive, too dangerous, too unnecessary, they argue. Meanwhile, pro-nuclear boosters, which somewhat bizarrely take in the French state, the Chinese state, and UK ministers who are so confident about the prospects for a nuclear renaissance they want other governments to build reactors for them, insist Hinkley Point is a great deal, completely safe, and utterly essential.
For the rest of us, there is nothing but confusion. Who should we believe? Is £92.50/MWh for 30 years, as Hinkley Point has been guaranteed, far too much for clean power or does the need to decarbonise and deliver baseload power negate cost concerns? Is it wise, from a security perspective, to give Chinese state-owned firms control over nuclear assets on the UK mainland, or should we acknowledge that the Asian superpower is now a valuable and trusted strategic ally? Why is a Conservative government handing money to companies owned by other governments while letting private sector UK clean tech firms go to the wall? No wonder the public is so confused, declaring itself pretty evenly divided between supporting the project, opposing the project, and not having a clue either way.
If you start from the position of climate hawk first principles - i.e. how can we decarbonise as quickly and cost effectively as possible - there is a compelling and credible argument that nuclear power can play a crucial role in a low carbon energy mix. As environmental campaigners, such as George Monbiot, Mark Lynas, and Chris Goodall, have long argued the scale of the climate change threat makes dispensing with the world's main source of low carbon baseload power a perverse thing to do. The problem, as Monbiot, Lynas, and Goodall have also pointed out, is that the Hinkley Point project is so "overpriced, overcomplicated and overdue" that it remains extremely difficult to justify, even if you think nuclear projects are critical to global decarbonisation efforts.
Today's announcement of Chinese investment in Hinkley Point, which drastically increases the chances of the project now going ahead, suggests the government is pretty relaxed about these concerns and is confident the remarkably generous £92.50/MWh price support contract represents a good deal, despite the fact it is double the current wholesale cost of power and higher than the level of support required by new onshore wind and solar projects, both of which are seeing costs continue to fall.
Ministers might yet be proved right, after all we need to decarbonise and there is a credible argument for paying a premium to deliver a stable, secure, and environmentally sustainable energy system. But, as with so much of the government's energy strategy at the moment, they have done a staggeringly bad job of explaining and justifying their underlying rationale.
For me, three big questions hang over the whole Hinkley Point debate, all of which are being glossed over and all of which should be addressed by a democratic government tackling topics as important as climate change, energy costs, and nuclear security.
The first is whether the level of subsidy being offered to EDF and its Chinese partners is really competitive?
At face value £92.50/MWh for 30 years from 2025 is eye-wateringly expensive, particularly when set against the fact new onshore wind and solar farms can be built for around £85/MWh now and renewable energy costs are widely expected to continue fall over the intervening 10 years, as they have done over the past decade. It even looks expensive when set against a projected cost for floating offshore wind farms of £85/MWh from 2025. And it looks wallet-emptyingly extravagant when set against the lowest cost form of carbon saving, namely energy efficiency measures leading to reduced energy use.
But the government argues, quite rightly, that we should not consider these figures at face value. We need to appreciate the fact Hinkley Point promises reliable base load low carbon power at scale, Ministers say, while renewables offer intermittent power spread over a huge area with all the additional grid costs that implies.
These are fair points, but they do not answer the question of whether or not this deal is competitive. For that we need to see some projections as to how £92.50/MWh, and any additional costs that may accrue, compare with projected costs for technologies that more closely match the advantages nuclear can offer. For example, could carbon capture and storage plants undercut new nuclear and offer the baseload power Hinkley Point promises? Similarly, could the recent sharp reduction in energy storage costs continue and marry with the falling cost of wind and solar to deliver reliable renewable power at a cost well below £92.50/MWh?
The truth is no one knows for sure, just as no one knows whether Hinkley Point will be delivered on time or on budget or go the way of the embarrassingly delayed EPR plants in Finland and France. But if the government wants to convince people the Hinkley deal is a good one it needs to at least attempt to provide some credible projections that demonstrate why it presents reasonable value. The absence of such projections only fuel fears this is a staggeringly bad deal for bill payers and a complete contradiction of the government's purported commitment to cost effective decarbonisation - a contradiction that leaves its accompanying efforts to strip renewables of subsidy support looking like an ideologically motivated hit job.
The government should show the working that underpins the £92.50/MWh figure, assuming of course such calculations both exist and can withstand independent scrutiny.
The second question relates to David Cameron's current favourite topic: security. Is the UK risking national security by giving the Chinese such influence over nuclear assets?
It can easily be argued that in a globalised world where we urgently need to tackle carbon emissions we should take much needed investment from wherever it is offered and seek to build trade relations with the world's emerging clean tech superpower. But plenty of other countries would balk at the idea of handing quite so much power and influence to a foreign government. Moreover, there is a glaring inconsistency in the Prime Minister's Jeremy Corbyn-baiting assertion we need an independent nuclear deterrent because it is an unpredictable world and the failure of imagination that suggests there is negligible risk involved in giving a foreign government control over civilian nuclear assets.
EDF today revealed the security services would be able to inspect the site, but the government needs to be aware that many people believe the crucial question over the level of security safeguards attached to new nuclear projects is yet to be answered satisfactorily?
The third and most important question addresses how Hinkley Point fits into an anticipated wave of new nuclear projects. In short, what happens next?
One way to justify the high cost of Hinkley Point is to see it as a fore-runner for a series of new nuclear projects that will lead to lower costs in the future and will ultimately deliver a cost effective, near zero emission power mix for the 2030s and beyond. This is the same argument used to justify the first wave of offshore wind farms, the expensive deployment of prototype wave energy systems, the proposed Swansea Bay Tidal Lagoon, and the long-awaited CCS demonstration projects. The government has said it envisages Hinkley Point being followed by new reactors at Bradwell, Sizewell, and beyond, while the promise of next generation integral fast reactors lingers, as always, in the background. But details on this crucial next wave of nuclear development remain extremely hazy.
If subsidies worth £92.50/MWh, plus loan guarantees, make sense for a trail-blazing project like Hinkley Point what price does the nuclear industry have to get down to for additional reactors to be developed? We know offshore wind has been told to get its costs down below £100/MWh by 2020 and developers are continuing to invest in the sector on the basis they think this is achievable. But what is the magic figure for the next wave of nuclear reactors? The government and EDF have said the price support for Hinkley Point would fall to £89.50/MWh if Sizewell C goes ahead and the company is able to share the first of a kind costs of the EPR reactors across both sites. But this is still a much higher cost than we'd expect renewables projects to be delivering power at by 2020, let along 2025. And what happens to the subsequent nuclear reactors the Chinese government wants to build in the UK? The government can't seriously be considering backing three or four of the 'most expensive power plants ever built', can it?
The last government's vision for the power sector appeared to be a series of subsidised proof of concept projects for the big three low carbon options - renewables, nuclear, and CCS - followed by intense cost competition between the different technologies through the 2020s in order to deliver the optimal mix. Is this still the government's strategy, because investors and developers right across the energy industry would love to know?
One of the many tragedies of the government's energy policy blitz is that just as competitive auctions for subsidy support were being shown to push down the cost of clean energy this approach was paused. The worry now is that without much clearer commitment to restoring a degree of competition to the clean energy sector as soon as possible, the UK risks being burdened with a scenario whereby a limited subsidy pot is lavished on a wave of high cost nuclear projects at a time when increasingly cost competitive renewables are denied the relatively modest support they require to scale up.
In addition to offering a detailed explanation as to how it came to conclude such expensive subsidies for a mature nuclear technology were justified, the government really needs to confirm that all forms of clean energy will soon have to compete on a level playing field for support. Such an approach may risk Hinkley Point ending up as the white elephant its critics predict, but it would also allow the nuclear industry to demonstrate once and for all whether it can play a key role in delivering the government's much trumpeted, but increasingly tarnished, cost effective decarbonisation strategy.
20 Oct 2015, 00:49
It has taken the better part of three decades, but I think we might finally be starting to get the hang of the internet.
This sounds like a strange thing to say following a summer when the hacked details of the extra-maritally inclined were made freely available and the most credible candidate for the post of most powerful person on the planet saw their campaign stumble over the use of a personal email account. But then again, look at this way, the breadth of online services is now so wide they include the arrangement of spouse-betraying liaisons, while the fact a 67 year old politician uses email, something that would be regarded as genuinely remarkable a decade ago, is seen as completely commonplace. The internet is completely embedded in our lives and the challenge now is to make it work for us and deliver the resource efficiencies and improvements to quality of life that were promised all those years ago when it seemed anyone with a dot-com dream could pull off an multi-million dollar IPO.
Everywhere you look in our most advanced urban centres there are encouraging signs this challenge can be overcome, drastically reducing our environmental impact in the process.
You will have no doubt read countless think pieces about the potential for the so-called internet of things to optimise everything from power grids to pizza deliveries. This is not one of those pieces. It is not about potential, it is about what you can do right now, thanks to the integration and convergence of digital world functionality and real world clean tech innovations. Assuming, of course, you are lucky enough to live in the right place, have a smart phone, and are willing to make a relatively small financial outlay.
Your phone can tell you when to leave for work so you can catch your fuel cell powered bus or nuclear-powered train just as you arrive at your stop or station. If you drive to work, your electric car or ultra fuel-efficient conventional car can tell you in real time where there is congestion to avoid and where you can get a parking spot. Or then again, you can just work from home.
On your way home you can turn your heating off if you are going to be late and turn it on again, along with your lights, just as you approach. If you have solar panels, you can programme your washing machine to turn on when your ‘free' power is at its peak or you can install a battery that will allow you to watch TV throughout the evening using solar power generated during the afternoon. If you don't have solar panels, Google will soon be able to tell you if your roof is suitable for them. Either way, the power you get from the grid can come from 100 per cent renewable and green gas sources.
If you decide not to take on the hassle and expense of owning a car, you can hire one, perhaps even an electric one, at virtually a minute's notice and pick it up from your own street. You can do this at the weekend and enjoy a day trip out, because the Saturday morning schlep round the supermarket has been replaced by an internet-ordered delivery that recommends the things you like and delivers them in an electric van. You can even avoid the need to think about what you want to eat, as someone will deliver a selection of ingredients and recipe cards for a series of nutritionally balanced and healthy meals, in so doing pretty much eradicating the food waste you would otherwise produce. Alternatively, you could just opt to order that takeaway pizza and get it delivered on an electric scooter.
Any food waste you do still produce can be collected for processing in an AD plant, delivering back some of that AD gas you use to heat your triple-glazed home or cook your internet ordered meal. When you are done with other things - furniture, clothes, books, CDs, DVDs - you can sell or give them away through various online platforms without any hassle. Although, you don't need to buy books, CDs or DVDs anymore - they have all been dematerialised for anyone with a smart TV and an e-reader.
Meanwhile, what money you have can be kept in green ISAs or savings accounts, and if you do not have the space to install a solar panel but like the idea of enjoying the financial returns clean energy projects offer you can club together with others through a crowd-funding platform to invest anything from £5 upwards.
I know, I know, it is all too easy to dismiss this vision as the very epitome of urban middle class, hipster smugness. And besides, who actually lives like this?
Well, growing numbers of people in the trend-defining hubs of Europe and the US. They may not embrace every aspect of this almost inadvertently low environmental impact life style, and, of course, they are no closer to addressing the big structural green challenges embedded in global supply chains and unsustainable business and consumption models than anyone else. But they are fully on board with large parts of this smart city, digitally-enabled approach to urban living - an approach that brings resource efficiency with it as standard. Moreover, they are embracing these new services for the convenience and financial savings they bring, as well as the social cachet and eco-benefits.
At a wider, macro level there is fascinating and under-reported evidence these same trends can and are extending outside of their caricature-rich demographic ghetto. There is a debate over whether or not we have reached peak car, but there is little debate about the historic and significant reduction in energy use that has been experienced in recent years and has outstripped any decline you would expect from the economic slowdown. UK energy consumption has been falling for nine years and there is little sign of the trend ending - you don't get over a 15 per cent reduction in primary energy consumption and sharp falls in household energy use because a few eco-hipsters change their lightbulbs.
The ubiquity of smart phone apps, the planned universal roll out of energy smart meters, and the municipal deployment of smarter transport management and energy grid systems similarly suggests this technology will not be confined to a narrow middle class audience. Although if parts of the smart city experience initially focuses on reaching a certain privileged demographic that will be no different to every single technology deployment of all time. Countless technological and cultural trends have entered the mainstream through the interests and concerns of the urban middle class, smarter and greener cities will be no different.
However, there are inevitably huge barriers to the realisation of this smart green city vision.
Firstly, there are the aforementioned global infrastructure challenges. Not everyone can purchase 100 per cent renewable power and green gas (much as the likes of Ecotricity and Good Energy would love them to try) as there is not yet enough to go round. Equally, improved resource efficiency amongst consumers cannot on its own tackle the carbon intensive manufacturing and unsustainable agricultural processes that drive the global economy. There is no silver digital bullet.
Secondly, there is the continuing paucity of enabling digital infrastructure. My bank holiday weekends this summer took in Devon, Sussex and north Essex, all beautiful in their way, all singularly lacking decent mobile phone signals. I would have found this irritating, but then again my lounge in south east London and the bus stop I use every morning is similarly digitally disconnected. The government's vision of a thriving modern national economy that is less reliant on its city hubs for success will remain thwarted as long as mobile coverage and broadband reach remains so patchy.
Thirdly, there is the huge system disruption that will result from true smart cities. Paul Mason's Post Capitalism paints a picture of how a truly networked economy where information has immense value could mark the end of capitalism as we know it. You don't have to agree with every aspect of his analysis to accept that the emergence of smart city systems will prove hugely disruptive for corporate incumbents. Just look at the way Germany's renewable energy surge and increasingly smart grid has resulted in negative power prices and escalating losses for the energy industry stalwarts still clinging to centralised infrastructure models.
Fourth, there is the paucity of political and policy understanding. Every technology revolution tends to run ahead of policy-makers' comprehension of what is going on, but the smart city is Usain Bolt to legislators' school sports day Dad's race. The debate on the policy incentives and safeguards that are needed to ensure the rapid, effective and safe deployment of smart city systems has barely started.
This absence of policy debate brings us to arguably the most significant challenge the smart city faces, namely, Big Brother privacy fears, or their modern counterpart, the Ashley Madison conundrum. One of the best books I have read in recent years remains Dave Eggers' The Circle in which the onward march of social media and the digitalisation of every part of our life becomes dystopian very quickly. Privacy concerns about smart technologies range from the absurd - my favourite Mail on Sunday headline of all time remains the warning about the march of the 'sinister fridges', which, shock horror, may turn themselves off for 30 seconds - to the worryingly credible - if state monitoring of all digital communication is disquieting for many imagine the state, or even your utility, having the ability to monitor every journey you ever take, including getting up off the sofa to turn the kettle on.
All these challenges will have to be openly and honestly addressed by those who reckon the benefits of the smart city far outweigh the risks. Because while there are plenty of barriers to overcome, one thing is increasingly obvious: the internet and its convergence with clean technologies and green business models is enabling the real world delivery of the rewarding, healthy, and sustainable lifestyles environmentalists have long promised. At an upfront cost that is affordable to growing numbers and will invariably deliver significantly lower outgoings in the medium to long term, we can all slash our environmental footprint and free up time and energy for the things in life that matter.
We are starting to get the hang of the internet, and in so doing we are discovering that much-maligned urban hipsters might just hold the key to a more sustainable and rewarding economy. Let's hope it does not take another 30 years to turn the promise of the smart city into reality.
16 Oct 2015, 14:14
Over the past two weeks I have spent four days at the Birmingham NEC, being denied sunshine while listening to various people talk about the grave state of the UK solar industry. At the Energy Hub for the UK Construction Week and Solar Energy UK (full disclosure, BusinessGreen was a media partner and I chaired panel discussions at both events), an understandably subdued atmosphere was in evidence as solar industry executives wrestled with optimism at the sector's exciting long-term prospects and genuine sadness at the recent job losses and bleak short- to medium-term outlook for the sector.
Let's start with the reasons for pessimism, if only because it'll be nice to end this blog post in search of an optimistic note.
The human impact of the government's decision to slash support for the solar sector is now being felt. Job losses are stacking up, every single one a sad blow to the individuals and families affected. Everyone in the industry is convinced significant numbers of further job losses will be confirmed in the coming months, the only question being whether companies shut up shop in a managed fashion or try to soldier on and eventually succumb to the weight of financial losses. There is surprise the predicted surge in new installations ahead of the government's planned cuts to subsidies has not yet materialised, but for whatever reason (have media reports left customers thinking the subsidies have already gone, or are solar firms too cash-strapped or disheartened to step up marketing activity?) demand has failed to spike significantly and companies are being forced to prepare for a contracting market.
Consequently, the sense of frustration, betrayal and resentment directed at the government across much of the industry is palpable. This anger is leavened somewhat by a recognition the Department of Energy and Climate Change (DECC) is in a difficult position with the Treasury pulling the strings, an understanding some pretty deep subsidy cuts are necessary and justified, and broad acceptance that greater control over clean energy subsidy spending should have been exerted sooner.
But even when those caveats are taken into account, many solar executives and investors remain angrily bemused at the almost wilfully cack-handed way the government has attempted to justify and manage its proposed reforms.
To give you just a sample of some of the questions I have heard asked in recent weeks: 'Why is the government talking about cost-effective decarbonisation while cutting support for one of the most cost-effective forms of power?' ‘Why won't the consultation on the subsidy cuts consider the impact on job losses and tax revenues?' 'Why did someone leak that tariffs would be cut 50 per cent when they were planning to cut them by over 80 per cent?' 'Why is the government still supporting technologies like nuclear, where costs are rising, and killing off a technology where costs are falling?' 'How can Amber Rudd say the industry is ready to stand on its own two feet, when well-run companies are going to the wall?'
The list goes on: 'Why is the government deliberately slowing renewables rollout when there is a real risk the UK will not meet its emissions and renewables targets?' 'How can they keep blaming the last government for this - didn't they have massive control over the last government?' 'Why is energy policy now being driven by Treasury officials who are so illiterate about modern energy technologies they buy into Daily Mail warnings about renewables' intermittency and outdated cost concerns?' And, most frequent of all, 'why do ministers keep saying this is all about protecting billpayers, when the impact on billpayers of a more balanced reform package would be significantly less than 11 pence a week in 2020?'
Satisfactory answers to pretty much all these questions have not been forthcoming.
Most pertinent of all though, several people made exactly the same point about the democratic deficit behind the government's attack on the solar sector. If the government wants to decarbonise using a centralised energy system based around continued support for nuclear, offshore wind, and carbon capture and storage, while the wider renewables sector is left to sink or swim, why did it not say that going into the election? Why did it not let people know these changes were coming? Why were ministers as late as this summer talking about nurturing a "solar revolution" and shifting the focus of the industry to large rooftop installations?
It may not command the same headlines, but the echo of the government's pre-election failure to mention it was planning to slash tax credits in a way that leaves many working families worse off - the human implications of which Amber Rudd was forced to confront on Question Time this week - is unmistakable.
Judging by some of their recent responses to this outpouring of grief, ministers appear a touch put out at the sense of betrayal being harboured by many within the solar industry. But how else are solar investors, executives and installers supposed to feel? You could argue they were foolish to develop business models based on subsidies that were going to get cut eventually. But they developed these businesses - and contributed to the UK's strategic decarbonisation and energy security goals, remember - at a time when Conservative ministers, in a government led by the same Conservative prime minister and chancellor we have now, were encouraging them to do so. Of course they feel betrayed, they have good reason to.
The problem is, this sense of injustice risks translating into a further deterioration of already shaky relations between the renewables industry and the government at a time when cool heads and polite debate are urgently required.
The BPVA's driving of a coach and horses through lobbying etiquette by allowing minutes of a fractious meeting with Amber Rudd to reach the public domain confirmed emotions are running high on both sides. Andrea Leadsom's recent tweets criticising campaigners in a manner totally unbecoming of a minister of state and then failing to back up her accusations with any evidence served to fuel fears antipathy towards green activists within parts of the Conservative Party could be clouding judgements. Equally, to accuse the government of having "blood on its hands" over the proposed subsidy changes, as one senior solar executive did last week, is as unhelpful as it is colourful.
The reason a civil and reasoned debate is urgently needed is that the solar industry, while facing a serious crisis, is not dead yet and there are things businesses and government could do to significantly soften the impact of the proposed cuts.
The panel discussions I chaired over the past two weeks saw solar investors and developers in agreement on two things. Firstly, the solar market will contract massively from next year, but it will continue to tick over. Some businesses and households that are as interested in environmental benefits as they are in financial subsidies will continue to deploy an attractive green technology. More importantly, well-located sites where the vast majority of the solar power generated is used on site will still be able to build a financial case for installing solar arrays, as the technology promises to undercut the cost of importing power from the grid. Additionally, investors will remain interested in refinancing existing solar assets that are performing well. The market will be on life support and lots of jobs will be lost, but it will not die.
Secondly, there is near universal agreement that the long-term prospects for solar remain as compelling as ever. The continued global reduction in solar technology costs coupled with the emergence of storage technologies mean the industry is within grasping distance of the point at which it can offer businesses and households a great value proposition without any subsidy.
Industry insiders agree that point will be deferred if the government slashes subsidies in a way that obliterates much of the installation sector, but it will still come, probably by the early 2020s. Many within the solar industry are well aware that at some point in 2019 Conservative ministers will probably point to a growing solar sector once again, and enquire as to what all the fuss was about back in the autumn of 2015.
The encouraging longer-term prospects for the industry, coupled with Amber Rudd's repeated assertion she wants to see the industry prosper, raises the question of what the government could yet do to minimise the disruption that is already being felt, while also minimising the impact on energy bills. There are options available.
The simplest, most effective, and yet most unlikely to be adopted option would be for the government to extend or relax the Levy Control Framework spending cap and free up a vanishingly small amount of extra cash to help the solar sector transition to a subsidy-free environment in a more gradual manner. The government's own impact assessment admits leaving the feed-in tariff system as it is would cost each household just £6 a year in 2020, which means a programme of more modest feed-in tariff cuts could minimise the contraction of the solar industry while costing households just a few pence a week. Some within the solar sector think as little as £1 a year could make the difference between a workable industry still transitioning towards being subsidy-free and an industry that is forced to spend two to three years laying people off and struggling to survive.
Ministers are very unlikely to embrace such a plan, not least because every clean energy technology would suddenly ask for its share of a relaxed LCF budget. Treasury orthodoxy will win out. But it should be possible for ministers in a government committed to tackling climate change and enhancing energy security to argue positively for billpayer-backed investment in a relatively low-cost technology that a large majority of the public support. After all, ministers look set to soon argue for high levels of subsidy to bring new nuclear, offshore wind, and carbon capture and storage projects to the UK.
An alternative plan that would keep the LCF budget intact is being put forward by former climate change minister Greg Barker, who argues making the earmarked £100m of funding available over a shorter period that would allow for slightly higher feed-in tariffs next year would increase the chances of the industry reaching grid parity this side of 2020. The government's impact assessment predicting next to no new installations from 2018 suggests ministers are already thinking along these lines. But an even tighter deadline for going subsidy-free could allow for less steep subsidy cuts that would give solar companies valuable time to bring down costs further.
Ray Noble of the National Solar Centre and the Renewable Energy Association recommends a different approach, noting that if you looked at how best to support the sector from this point with fresh eyes, no one would propose 20-year price support contracts, not when it is less than five years from delivering grid parity. The Autumn Spending Review will be eye-wateringly tight, but Noble argues that modest and time-limited capital grants or, more likely, tax breaks for solar and energy storage systems could make a huge different to the industry's prospects. There are plenty of things a savvy chancellor could do to build on the solar industry's success while still slashing subsidies, particularly when he is about to pocket a windfall from privatising the Green Investment Bank. He just has to want to do it.
And then there are the non-subsidy related steps a government that is serious about nurturing the renewables industry could take. Ending minimum import pricing on Chinese solar panels would throw the industry a significant lifeline, as would encouraging councils to use their new powers over business rates and their ability to introduce local building rules to create clean energy hubs. Similarly, if the cuts are to be pushed through as planned and thousands of jobs are lost, then it would be only fair to provide the kind of retraining packages routinely offered to other industries going through tough transitions.
This vibrant and strategically important industry has been left blind-sided, battered and bruised by an assault on clean energy policies that featured nowhere in the Conservative election manifesto or in the Party's pre-election rhetoric. But could still have an important role to play in the UK's future low-carbon energy mix and a combination of continued cost reduction from the industry and a handful of conciliatory policy moves from the government could make the crucial difference between a temporary solar industry crisis and a deeply damaging catastrophe for the sector.
The government has said its current proposals remain open to consultation, and the solar industry will be desperately hoping ministers listen to credible warnings about the impact its reforms will have before too many more jobs are lost.
15 Oct 2015, 15:41
If the government's decision to privatise the Green Investment Bank (GIB) was short sighted, the plan to privatise it while removing the legal requirement for it to remain a green-focused institution appears almost blind.
Let us leave aside for a moment the debate about whether it is wise to dismiss everything we know about mainstream economics and the success of state-backed banks in other countries, in order to privatise a bank that could borrow at ultra-low interest rates if only the government let it. After all, economists and politicians have spent more than five years trying to convince the government of the merits of Keynesianism and have singularly failed to get George Osborne to accept that if we are going to let the Chinese government fund our strategic infrastructure, we might as well borrow and fund it ourselves. Moreover, this privatisation is being handled by Sajid Javid (pictured), a man who apparently thinks Ayn Rand's The Fountainhead is one of the greatest books ever written, presumably on the grounds the one thing all literary classics need is naked ideological dogma. Rightly or wrongly, the GIB is going to be privatised, the question is how and when.
This question has become vexed by the advice the government has taken, which insists it has to repeal the legislation that gives ministers a veto over the GIB's articles of association, including the five governing principles that give the bank an explicitly green remit. BusinessGreen understands both government and GIB officials are extremely frustrated at this advice, which is so restrictive it suggested even if the government sold its entire stake in the bank it would remain on the government's balance sheet as long as ministers had a degree of legal control over the institution.
It may seem like an arcane detail, but the repeal of sections of the Enterprise and Regulatory Reform Act 2013 could have a drastic impact on the nature of the GIB and the UK's wider green investment landscape. When the privatisation was originally announced, the bank's management sought to alleviate concerns that its influence would be diluted if the government offloaded it, arguing the state was likely to retain a minority stake and pointing to the way its core mission was cemented in law. Now that legal protection is to be repealed and we still have no indication as to what stake, if any, the government will retain in the bank.
You can see why green business leaders and campaigners will be concerned. The bank has not been perfect – critics maintain it should have done more to support higher-risk early-stage green infrastructure projects, instead of focusing on recycling investments in existing assets – but it has provided an important source of capital in an emerging market and provided further assurance to other investors that the government has skin in the game when it comes to low-carbon infrastructure.
Now, the risk of the bank being repurposed by its new owners to shift its focus ever further away from higher-risk emerging technologies and towards projects that may qualify as 'green' only in the loosest sense (or may not even qualify at all) has increased. Sources close to the bank argue the main reason buyers are interested is because of its record in an exciting and expanding green market. That is no doubt true, but without the threat of ministerial veto it would become easier for a privately owned GIB to back any number of commercially viable, but environmentally dubious projects. The risk remains small, but would the government be able to stop a privately owned GIB deciding that efficient coal plants or fracking projects are green enough and deserving of support?
In announcing this morning that he will move to repeal the key legislation, Javid attempted to downplay these concerns, insisting that "as part of any sale process, we would expect potential investors to confirm their commitment to GIB's green values and to set out how they propose to ensure these are protected."
His phrasing seems to suggest the ball is in the prospective buyers' court and it is up to them to put forward credible guarantees to ensure the bank's green purpose is protected. But the government has a responsibility too; a responsibility to ensure these guarantees are watertight and cannot be reversed by a future owner.
Contractual protections are all well and good, but, having been burned by some of the agreements that characterised the Royal Mail privatisation, the government needs to ensure any guarantees come with harsh penalties if they are breached. Better still, ministers need to think creatively and find a new way to cement the bank's green principles in its articles of association. Is it too late to turn the GIB into a B-Corp?
The clock is ticking. The GIB needs additional funding next year if it is continue to grow and provide a much-needed source of capital for the UK's faltering green economy. If ministers are really insistent the bank can borrow only once it is off balance sheet, they need to find a way of getting it off balance sheet, quickly. But in this rush to get the bank into private hands, they also need to provide 100 per cent assurance the GIB will remain green.
Guaranteeing the GIB's green status is not just important, it is essential. And once such guarantees are secured, perhaps the government can offer some insight into what it plans to do with the revenue generated by the sale of a taxpayer-funded body that is committed to decarbonisation. Because currently, a host of decarbonisation policies from the feed-in tariff to the renewable heat incentive to the domestic energy efficiency regime and various clean tech R&D programmes are looking chronically underfunded at a time when the UK is no longer on track to meet its legally binding emission reduction targets. The chancellor no doubt already has some ideas on what to do with the proceeds from the GIB windfall, but there are a lot of industries the GIB was designed to nurture that could really do with the cash right now.
08 Oct 2015, 00:05
Are many of the world's most powerful political and business leaders lying to us? I know, I know, the last thing the climate change debate needs is another conspiracy theory, not when the last 30 years has seen global warming conspiracy theorising run the full gamut from faked moon-landing-level craziness to Watergate-esque 'how the hell did they think they'd actually get away with that' bemusement. But bear with me, because the last few years have seen the emergence of a new climate change conspiracy theory, or rather a climate action conspiracy theory, and it needs addressing, not least because you will be hearing a lot more about it in the run up to, and fall out from, the Paris Summit.
The main theory - and there are numerous overlapping versions - goes like this: many world leaders in the spheres of politics and business say they are fully committed to deep decarbonisation of their economies and corporations, they have signed up to targets to deliver this goal, and enacted policies and investments to ensure it is met. But they are either intentionally lying or unintentionally misleading us all. The targets won't be met and the governments and businesses that are signed up to them are often, in reality, not that serious about trying to meet them.
Like all the best conspiracy theories, it is a depressingly plausible hypothesis. If it is proven to be accurate it will be one of the biggest scandals in the history of civilisation, not that its historic nature will be much comfort to the climate change-ravaged civilisation that remains.
This theory is increasingly popular with many of the world's leading fossil fuel companies, investors, analysts, media commentators, certain politicians, some environmentalists, and, inevitably, plenty of climate sceptics. It is not widely seen as a conspiracy theory, because it is more commonly understood as a dispassionate and realistic acknowledgement of the true scale of the challenge decarbonisation presents and the strengths of the status quo, but it does require us to believe the public are being systematically misled.
At this stage it is too early to tell whether this theory is based on a true conspiracy of intent or a cocked up conspiracy of incompetence and negligence. It is also too early to tell whether these alleged political and corporate machinations will join the long list of crackpot conspiracy theories or will come to be remembered as the greatest deception governments and corporations ever perpetrated on their populations and markets. You absolutely do not have to be part of the tin foil hat brigade to believe this conspiracy is happening. In fact, parts of it almost certainly are.
Few people on either side of the decarbonisation debate want to present their arguments in terms quite this stark, but the assumption world leaders are misleading us is the logical extension of the case put forward by those who reject the carbon bubble hypothesis that we cannot and will not burn our current fossil fuel reserves and avoid dangerous levels of carbon emissions.
All those fossil fuel companies, analysts, business executives, investors, and some environmentalists happily accepting models that assume we will fail to decarbonise quickly enough and will continue on an emissions pathway for several more decades that will result in more can 4C of warming this century, are doing so at a time when the emissions reductions pledges being put forward by governments ahead of the Paris Summit raise the prospect of a trajectory towards 3C of warming with the potential for deeper cuts further down the line.
As such, they are tacitly telling governments they think they are either lying to us all or lack the power and governance skills to deliver on their promises. World leaders really should feel insulted each time the oil industry predicts a 4C to 6C future - they are basically accusing Obama, Cameron, Merkel, Xi, Modi and co of being incompetent and/or powerless.
They are also tacitly telling all those clean tech innovators and green business pioneers that they are not up to the job and will not deliver the technology revolution that is required to drag the world back onto pathway towards 3C or preferably 2C of warming.
The problem for those of us who, in our happier moments, remain optimistic deep decarbonisation can be delivered and the worst climate risks averted is that there is solid evidence to back up suggestions world leaders are working to ensure their commitments to tackle climate change will not be honoured. From Obama's licenses for Arctic drilling to Osborne's North Sea tax breaks it often looks as if pledges to cut emissions should not be taken at face value.
And then there is the sheer scale of the decarbonisation challenge. The extent to which fossil fuels are embedded into the global economy and will continue to drive the development paths of many emerging economies makes it all too easy to conclude that even if governments and businesses decarbonisation intentions are good they don't actually have the power to deliver on them.
But many of those claiming global, national, and corporate emissions goals will not be met do not confine themselves to arguing deep decarbonisation will prove too difficult, they also suggest we will not even make that serious attempt to prove them wrong. Hence, continued investment in exploring for high cost fossil fuel reserves can be justified because climate legislation will not bite that hard and alternative clean technologies will not prove that disruptive. They are effectively assuming those world leaders who claim the global economy can fundamentally change are bluffing, and are calling that bluff.
However, the argument environmentalists are the naïve victims of a global conspiracy where the combined power of cheap abundant fossil fuel energy and vote-winning real politik makes any talk of deep decarbonisation a con has to be set against some counter evidence.
Many of the world's largest industrialised economies are already engaged in an historically significant but underreported trend that has seen economic growth decouple from energy use and emissions output. Modern economies are operating with a far higher proportion of clean power on their grids than anyone ever thought possible. For all its myriad flaws, many of the climate targets set under the Kyoto Protocol have been met. The EU is on track to overshoot its emissions goals for 2020. Only this month, India noted how it is on track to slash the carbon intensity of its economy 20 to 25 per cent by 2020. These trends are not moving fast enough to comfortably disprove the pessimistic assertion the next wave of emissions targets will be missed, but the past is not always the best guide to the future. There are signs systemic change is underway.
And then we have to consider the next wave of emissions targets that are in the pipeline. It now seems pretty certain the Paris Summit will result in the adoption, albeit on a voluntary basis, of a global network of climate action plans, the bulk of which include detailed commitments to curbing greenhouse gas emissions and mobilising billions of dollars of clean tech investment. These action plans, or INDCs in the jargon, follow the UN's Sustainable Development Goals (SDGs), which, if they are met by 2030 as planned, will result in a global economy transformed. The UN's targets on everything from sustainable energy to protected seas look absurdly optimistic, but much the same was said of the Millennium Development Goals, which through a combination of investment, ingenuity, and economic progress have proven transformational, even if not all of them have been met.
On top of these national and international targets come a host of equally ambitious sustainability goals from many of the world's largest businesses. Through their commitments to slash emissions or source 100 per cent renewable power, many of the world's most influential multinationals are rejecting suggestions from their polluting peers that deep decarbonisation over the next few decades is a pipe dream.
Advocates of the climate action conspiracy theory have done a very good job of positioning it as rational and realistic, hence why it is not really seen as a conspiracy theory at all. But if you think about it, it is actually pretty incendiary. Whenever a Prime Minister or President or the G20 says they will deliver deep decarbonisation in the coming decades, the response implicit in investment plans and projections that assume 4C of warming this century is ‘no, you won't'. Whenever the finest minds in Silicon Valley put forward a vision to create a cleaner global economy, the response from some of their counterparts in polluting industries is 'not gonna happen'.
One of the first rules of journalism is to always remember Louis Heren's famous adage, 'why is this lying bastard lying to me?' But is it plausible that virtually every world leader preparing to travel to the Paris Climate Summit this December will inadvertently or wilfully lie to us when they say they will take ambitious action to tackle climate change? Because that is what those advocating for, or investing in, the long term continuation of carbon intensive activities are claiming. They are asking investors to accept the emergence of cost effective clean technologies and the sweeping introduction of national climate action plans are minor developments to distract the masses while fossil fuel incumbents can continue to operate much as they have always done, limiting themselves to the occasional nod towards decarbonisation happening at some point, far in the future, when it is already too late. They are arguing that if they hedge their bets at all it should be through marginal investments in a handful of carbon capture technologies, rather than an urgent rush to re-engineer their entire operations and deliver the clean technologies we desperately need.
Call me naïve, call me optimistic, perhaps even call me a crazy conspiracy theorist, but I'd argue businesses have to at least countenance the possibility that governments and corporations might just do the things they say they are going to do. There will no doubt be plenty of setbacks along the way, but the flurry of new policies in the build up to the Paris Summit suggests we are entering a period when the argument that meaningful climate action is not happening will look about as credible as the argument climate change itself is not happening. We may still fail in avoiding the worst impacts of climate change and world leaders may struggle to deliver on their promises. But savvy businesses and investors need to recognise how the global commitment to deep decarbonisation is strengthening, because after all, who wants to build a business plan based on a conspiracy theory.
ABOUT JAMES' BLOG
Previously known as the BusinessGreen Blog, James' Blog features musings, observations and occasional rants from BusinessGreen editor James Murray
Browse posts by date