Published on October 24th, 2012 | by Joshua S Hill0
UK Must Target Policies to Promote Renewables, Big Clean Energy Companies Pulling Out of UK Plans due to Uncertainty
October 24th, 2012 by Joshua S Hill
A WWF-UK funded paper published Tuesday made it clear that the UK government must target policies to promote renewable energy solutions in an effort to reduce the country’s carbon footprint and increase investor confidence in the country’s renewable industry.
The report, “On picking winners: The need for targeted support for renewable energy,” was written by Dr Rob Gross of Imperial College London and arrives at a turbulent stage for the UK energy policy.
Already this year, the UK has lost three major investors in the offshore wind industry: General Electric put on hold its €110 million planned investment in a UK offshore manufacturing plant, citing the lack of clarity in the UK’s renewable energy policy; Korean company Doosan Power Systems similarly cancelled its planned investment citing “sapping market confidence” in the UK’s offshore wind market; and Vestas cancelled its plans to employ up to 2,000 people in an offshore turbine factory.
Additionally, Siemens, Alstom UK, Mitsubishi Power Systems, and four other companies have threatened their own pull-out due to a lack of decision-making, saying that threats to relax key targets “have caused us to reassess the level of political risk in the UK” in a Times article published earlier this month.
The report makes it clear that the popular notion of a “carbon price to fix it all” is simply not viable. Carbon pricing will play a part, the author notes, but it must play a part in conjunction with financial support policies such as feed-in tariffs and the Renewables Obligation.
“There is a notion, popular amongst some energy economists, that carbon pricing is the only policy we need in order to save the planet,” said Dr Rob Gross, Director of the Imperial College Centre for Energy Policy and Technology. “This is so simplistic it is absurd. Renewable energy in particular needs the policies that are investment grade. Only then will we get costs down and create a cleaner and more secure energy system.”
“Investing in large-scale wind is not the same as investing in small-scale wind or solar and neither is it the same as investing in gas. We need horses for courses in our energy policy. The government understands this but is often being urged to take a different approach in order to simplify energy policy. I am all in favour of simplicity, but we must not lose sight of what drives investment, and what investors need. Targeted policies are essential. If the government relies too heavily on carbon pricing the result will simply be higher bills and higher carbon.”
The report highlights a number of limitations which could arise if carbon pricing was the only policy driver to support investment in renewables:
- A carbon price will rarely be set at the level necessary to attract investment in newer clean technologies like renewables. Instead, it is more likely to drive investment from coal to gas.
- A carbon price set high enough to drive investment in emerging technologies which cannot yet compete with established fossil fuel generation would risk a windfall for operators of existing low carbon plant and higher prices for consumers. Targeted financial support policies combined with a lower carbon price provides an effective way of providing certainty to renewable energy developers whilst driving investment away from high carbon technologies across all sectors.
- At the global level, fossil fuels are more often subsidised than taxed, which also undermines carbon pricing. The effect of fossil fuel subsidies is therefore to create, in effect a ‘negative carbon price’.
- Carbon pricing does not do enough to overcome the non-financial barriers that hinder the deployment of emerging technologies such as compatibility with existing infrastructure, incumbent lobby interests and skill shortages.
“Dr Gross’ report exposes the deep flaws in the argument that carbon pricing can do it all,” explained David Nussbaum, Chief Executive of WWF-UK. “Whilst the simplicity of this argument may sound appealing, in practice relying on carbon pricing alone is likely to lead to carbon-intensive gas plants continuing to dominate our energy mix – preventing newer and cleaner technologies from realising their potential and locking us in to a risky reliance on largely imported fossil fuels.”
“Without targeted and proportionate policies supporting our renewables industry, we will miss out on the opportunity rapidly to reduce the costs of emerging renewable technologies and on the promising economic growth opportunities that the sector has to offer the UK. This would be a huge missed opportunity given the UK’s current industrial leadership in offshore wind and marine renewable technologies.”