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4. Budget and Climate Bill Reactions

The 2007 Budget was not received with unalloyed enthusiasm. The announcement that Ofgem, the regulator, would ‘examine how green homes can benefit more from the prices paid when they become not just sources of clean energy for themselves, but sell it back to the grid’, and the proposed tax relief on renewable obligations certificates, were both welcomed, but commenting on the additional £6m for the Low Carbon Buildings Programme

Jeremy Leggett, chief executive of Solar Century, said: ‘We have won another small increment in the long-running drip-feed for the British solar industry, which limps on while our counterparts in competitor countries soar’.

Lynne Jones, Labour MP for Birmingham, Selly Oak, said that ‘these are minuscule measures. At present, in the low carbon buildings programme there is a monthly allocation and it runs out within 75 minutes. The Chancellor has put in an additional third, so perhaps the money will not run out for 100 minutes. About tax relief on renewables obligation certificates, I am rather sceptical. It has all the hallmarks of a gimmick. The system of ROCs was set up for larger generators of renewable energy. It is an extremely bureaucratic process to obtain the certificates and the transaction costs will heavily outweigh the benefits for small developments.’

Instead, Jones said, why not adopt REFIT, the Renewable Energy Feed-In Tariff system used so successfully in Germany and most other European countries? ‘The proof of the pudding is in the eating. With our system of renewables obligation certificates, renewable generation has increased from 2% in 1990 to 4.22 % in 2005. In Germany the increase has been from a slightly higher base, 3.2%, to 10.2%. The costs of the measures are similar. It costs the consumer in Germany about £12 a year, compared with £7 in our system, but obviously the German system is much more successful. I hope the Government will move away from the renewables obligation method to the feed-in tariff. That will be a sign that they are taking their obligation to tackle climate change seriously. If we had good feed-in tariffs, the grants would not be nearly as relevant. There would be every incentive for local communities to set up community renewable energy schemes. We saw that in Germany, in a village with its own combined heat and power system, which was set up by two farmers who wanted another means of selling their arable crops. They were able to get investment on the back of the amount of money that they obtained from selling the electricity they generated as a by-product of the heat that heated the village. Similarly, they had a photovoltaic system on the roof of the building where they stored their tractors, and I reckoned that that was bringing them in about € 30,000 a year as a result of the feed-in tariff. That tariff also encourages innovation, because although the payment received from a particular investment is consistent over 20 years, a new investment the following year gets a lower payment. The big plus of that system over ours is that it is reliable. People know that they are going to get that income over the 20-year life of a project.’

Alan Simpson, Labour MP for Nottingham South, was even more upbeat on REFIT: ‘It requires the energy industry to pay customers four times the current market rate for the renewable energy that they put back into the system. The effect has been transformational. The measures resulted in a cavalry charge of German citizens seeking to become part of the renewable energy generating process, and produced a renewables industry that, last year alone, delivered 214,000 new jobs into the German economy, and 24,000 in the last year alone. In that last year, 90 million tonnes of carbon savings were delivered- a huge quantum increase on the combined levels of carbon savings of all the UK schemes. The German system has been successful because it was citizen-driven.’ Germany has 20GW of wind plant, the UK 2GW.

UK Innovation

The Budget allocated £100m more to the DTI’s Technology Progamme, which is overseen by the governments Technology Strategy Board, to support UK innovation, including £15m for work on low carbon projects.

Plastic PV

In parallel the Research Councils are funding some interesting projects. For example, Manchester University and Imperial College London have been given £1.5m by the EPSRC for work on cheaper, higher efficiency hybrid organic polymer /‘quantum dot’ nano-particle solar cell materials

Climate Bill Reactions

Most commentators were quite enthusiastic about the new Climate Bill proposals, even if some greens said they were ‘too little too late’ and complained that the new targets did not cover aviation and shipping.

So will they and Browns new proposals and commitments be enough? The consultative Climate Bill paper included the graph above showing how the UK should meet its 12.5% by 2012 Kyoto greenhouse gas emission cut target, but would not meet its self imposed 20% by 2010 carbon dioxide reduction target. It’s true that the UK has done reasonably well in getting overall emissions down since 1990, the baseline year. Much of this has been due to the dash for gas, but the UK has also cut non-CO2 emissions.

The Climate Bill paper says that ‘through a range of measures the UK has been successful in reducing emissions from non-CO2 greenhouse gases; in 2005 emissions had fallen 44% since 1990 and are projected to fall 50% by 2050’. It notes that ‘methane emissions from landfill, which constituted slightly below 60% of all methane emissions in 1990, have fallen 60% by 2005, largely due to use of landfill gas in electricity generation, which by 2005 had risen 18-fold from 1990 levels (based on oil equivalent usage)’. However, it adds ‘Further non-CO2 emissions reductions can be very difficult and/or costly’, so the emphasis will be on CO2 reductions.

The Climate Bill puts a lot of stress on the EU Emission Trading system as the best way forward overall- and sees the proposed new system of 5 yearly carbon budgets with 15 year time horizons as feeding into that- and linking in well with the Kyoto protocol time frames. The consultation paper offers plenty of opportunity for comment on the mechanisms for this- e.g. on the role of the proposed Committee on Climate Change- but very little indication of exactly what emission saving might be attained. Even the linked Climate Change Strategy paper only talks in generalities. In effect it’s left to the Energy White paper to provide the details, but (see earlier) that was not too convincing.