The government’s long-awaited Clean Growth Strategy raises more questions than answers on how we can deliver a low-carbon economy.
As the Committee on Climate Change (CCC) warned in its annual report this year, “urgent action” is needed to close the policy gap and get the UK back on track with decarbonisation. Yet there is next to nothing in the strategy in terms of an actual plan around investment, skills development, research and future markets after Brexit.
It is difficult to overstate the scale of the challenge facing the UK. To meet our carbon targets, which are legally binding, the UK needs to add a total of 130-150TWh of low-carbon generation output by 2030, equivalent to nearly 50% of current consumption, while also investing heavily in storage and flexibility measures like demand response, which incentivise consumers to reduce consumption at peak times. This in itself is a staggeringly ambitious objective, beyond anything that has been attempted in the past and on a very short timescale.
Yet, at the same time, we need to replace existing capacity as well. Our carbon targets require all of the remaining coal-, and most of the existing gas-fired generation, to be phased out by 2030. A significant proportion of existing nuclear capacity is scheduled to be decommissioned by the middle of the next decade, with uncertainty and concerns about Brexit already affecting plans for its replacement.
The UK starts as a high-achiever on climate change, cutting emissions by 42% since 1990. In 2006 less than 5% of UK electricity was produced by renewables; ten years later that figure was close to 25%, and the figures for the second quarter of this year were close to 30%.
The problem, which the Clean Growth Strategy doesn’t fully acknowledge, is that progress is stalling, partly because many of the gains to date have been the result of one-off measures that can’t be repeated. Three quarters of all the emissions reductions since 2012 have been achieved by a shift away from using coal to generate electricity; now that coal has largely been removed from the generation mix, progress on reducing emissions is forecast to stall.
Without some radical new thinking, we are on track to miss our carbon targets by a very wide margin. The Clean Growth Strategy does offer £557m in new subsidies for renewables, which is welcome, but it hasn’t spelled out exactly when and how the money will be available.
And while this level of funding is significant, it falls well short of the sums needed to achieve the decarbonisation of the power sector, which is effectively where we need to be by 2030. There is also no clarity on the carbon price floor beyond 2020, which will play a key role in energy investment decisions.
A heavy emphasis on innovation and energy efficiency is welcome, but again the strategy lacks a serious analysis of the challenges facing the UK. The impact of Brexit, of which there’s little mention, is likely to be significant on the UK science and research sector, as EU funding is lost, and the status of UK-based EU researchers and access to pan-European research networks is threatened.
And while energy efficiency is crucial, the government is being somewhat disingenuous; it is only because the coalition government abandoned ambitious energy efficiency programmes that urgent action on this front is now needed to get us back on track.
The Clean Growth Strategy is also noticeably silent about the critical issue of skills. The energy industry is facing the twin pressures of an ageing workforce and a growing demand for skilled labour, and the Energy and Utilities Skills Partnership has forecast that the electricity sector will need to replace 53,000 retirees and others leaving the sector, and hire an additional 10,000 workers to meet rising demand for skilled labour.
The University of Hull forecasts that the offshore wind sector alone will add nearly 40,000 jobs by 2032. Delivering low-carbon growth, and winning a share of the huge global market in clean technologies, will be impossible without a proper fully-funded plan to grow and develop a skilled workforce.
The delays and lack of detail around the Clean Growth Strategy highlight the problems facing the UK energy market. We need a co-ordinated, long-term approach to energy policy. Instead, we have a confusing and complex mix of players with little strategic oversight. At the moment responsibility for setting targets, scrutinising policy and planning strategy in the energy sector is divided between numerous departments and agencies, including the Department for Business, Energy and Industrial Strategy; Ofgem; National Grid; the CCC and others.
The energy price cap, announced today, is another example of this: popular anger at energy company profits and fuel poverty are real and justified, but a badly designed price cap risks doing more harm than good. Iain Conn, CEO of the UK’s largest energy retailer Centrica, has already reassured investors that his company will respond to a price cap by slashing its costs, rather than cutting back on dividends to shareholders.
We can’t afford to get energy policy wrong, and time is growing very short if we are going to meet the targets we have set for decarbonising our energy system and our economy. It’s time for an urgent, serious overhaul of energy policy, so the UK can benefit from the clean energy revolution while showing true global leadership on the challenge of climate change.