Energy crisis

Still warm with the glow of leading one of the first countries to officially turn its back on coal-fired power, David Cameron was riding high as he addressed the climate conference in Paris this week.

It’s amazing what a difference a fortnight can make. Prior to the ‘Energy Reset’ speech made by energy secretary Amber Rudd last month, the minister had spent the previous few months quietly dismantling a string of government subsidies created to encourage business investment in clean, renewable energy.

As we move away from relying on coal for our energy supply, it’s important the right signals are in place for investors to build new gas-fired power stations - at present, they are hard to find

CBI business environment director Rhian Kelly

But then, just a week or two before Paris, announcements from the Department of Energy & Climate Change (DECC) poured out thick and fast, as its grand plan for the future energy security of the nation began to take shape.

The bold declaration to ditch unabated coal-fired power within the decade delighted green campaigners, but before they even got to the second line of the hallelujah chorus, came the revelation that instead of a clean energy revolution, reliance on gas and nuclear power would be our saviour.

While most agree the future of humanity should be an overriding concern, decisions such as these can also mean life or death for energy-intensive industries, saddled with rising environmental tariffs. They are reliant on a secure supply of affordable energy in order to stay in business and provide us with the necessities of life.

After all, even the most vociferous climate campaigners still want to be warm at night, run their cars efficiently and see something more substantial than grasshoppers on the dinner table.

So we look to our governments to marry up these conflicting interests. They must balance our short-term desire for industrial productivity and the comfort it brings against our long-term desire for human survival.

Gas and nuclear power is the government’s response.

Rudd’s key argument is that investment in these will provide a more secure long-term supply for the UK, than many of the cleaner, greener alternatives.

In other words, investment in the fledgling renewable energy generation industries is deemed to be costing us all a bit too much.

So no clean energy revolution, after all.

Pins could be heard dropping everywhere, and then industry tapped out its reply.

“Before the government changed the policy goalposts, onshore wind and solar were on track to be the cheapest sources of UK power with the potential to be subsidy-free by 2020,” said Juliet Davenport, chief executive of renewable energy company Good Energy.

“The government’s apparent preferred options of nuclear and gas, and an old fashioned grid are not cheap and will not be subsidy-free for decades.”

Jenifer Baxter, head of energy and environment at the Institution of Mechanical Engineers had other concerns.

“Increasing demand for natural gas will lead to other ‘difficult’ challenges in securing the gas network in the UK. This may include more imports and potentially greater use of shale gas.”

Likewise, she points out that while nuclear power generation has a role to play in the energy mix of the future, it would also demand significant investment into the safe and environmental management of the whole cycle of nuclear fuel.

So who will be paying for all this new infrastructure? No one really seems sure.

“As we move away from relying on coal for our energy supply, it’s important the right signals are in place for investors to build new gas-fired power stations - at present, they are hard to find,” said Rhian Kelly, business environment director for the Confederation of British Industry (CBI).

“A smooth transition from coal to gas is critical, so we must ensure we have new capacity before we take coal out of the energy mix.”

While there was little detail on who would foot the bill for all of this new capacity in last week’s Autumn Statement and Spending Review, it did bring cheery news to some sectors. The embattled steel and chemical industries breathed a collective sigh of relief at the decision that energy-intensive industries would be spared the additional cost of environmental tariffs with their power bills.

But then came one final flourish before the politicians left for Paris; a two-line statement issued on the same day as at Autumn Statement, effectively pulling all funding for a £1bn Carbon Capture and Storage (CCS) competition that was created three years ago to promote development of carbon abatement technology for use in industry. 

“In choosing to save a relatively small sum of tax payer money in 2015, government is unnecessarily committing vast amounts of future energy consumers’ money,” said Claire Jakobsson, head of climate & environment policy at EEF, the manufacturers’ organisation.

”For many sectors, such as steel and cement, there are simply no other options available for cutting emissions. No CCS locks many industrial sectors into a carbon intensive future paying increasing amounts in carbon taxes.”

In the face of all these u-turns, it’s hardly surprising the CBI sent a strong plea to world leaders gathered in Paris this week.

”British businesses are seeking a clear sense of direction,” said Kelly.

“We all know there is no easy answer to climate change. But, business and industry are part of the solution - developing innovative new products and services, and leading the way in cutting emissions, to propel us towards a low carbon future.”

Let’s hope someone in Whitehall is listening.