2. Smart Green Tory Growth

The Conservative Party’s Quality of Life Policy Review, ‘Blueprint for a Green Economy’, overseen by Zac Goldsmith and John Gummer, takes on board much green thinking, claiming that we can have green growth and a happier society by combining smart technology with reduced demand. It calls for an 80% cut in emissions by 2050. And it supports some sensible policies- including the rapid expansion of renewables. But when it comes to the practical proposals there are some contradictions. For example it recommends a system of ‘competitive feed-in tariffs for renewables’- see below.

Feed In Tariffs are widely seen as better than the UK Renewables Obligation, but the key feature in the success of the FIT approach is that prices are fixed- i.e. they are not set by the market. The Tories want competitive tendering- similar to the old ‘Non Fossil Fuel Obligation’.  

As the BWEA noted ‘this was scrapped in the late 1990’s because bids by generation companies were pushed so low that successful schemes were not economic to build’. The Tories report claims that support for on-land wind can now be dropped since the wind industry is currently making 25% profits on its schemes: see right. However the BWEA says that ‘in reality the level is between 10-15%. This level of profits is dependent on the Renewable Obligation which the report would scrap. Other energy investments make a similar rate of return, however they are lower risk and do not receive support.’  

It could be argued that some of the risk is due to the nature of the RO- and its variable market-shaped prices. But it’s true that, as the BWEA says, the Reviews proposals would end support for onshore wind- it ‘would make schemes uneconomic and effectively choke off investment overnight’.

The World Future Council, which has been promoting Feed In Tariffs strongly, also objected to the Tories version of the idea: ‘The Conservatives are mis-using this term to provide a cover for its proposals that will dismember the UK’s renewables programme’.  It was also worried by the Tories proposal to replace the Climate Change Levy with  Carbon Levy.  Dr. David Toke of Birmingham University, author of its report on renewable energy Feed-in Tariffs, claimed that ‘this policy represents a reduction in support for renewables and an increase in support for nuclear power’.  

At present under the Climate Change Levy, nuclear electricity is charged the full amount on a kWh basis, as is power from fossil fuels, while power from renewables (large hydro apart) is exempted. But under the Tories proposal, nuclear would also be given a ‘carbon levy’ exemption- and the levy would be charged proportionately to the carbon content of the fuel.  

Nuclear would also benefit from the EU Emission Trading System. But otherwise the private sector would have to meet all the costs, including  decommissioning costs: ‘the government would not underwrite the risk of building a new nuclear power station’.  And interestingly it adds ‘we are not persuaded of the case for any government funding for research into new generation from nuclear power- in particular, for nuclear fusion’.  

As well as calling for a ban on electric heating and electric air conditioning in new commercial buildings, the review proposes a power station waste heat levy which would also apply to nuclear plants. It argues that ‘although it might be argued that waste heat from nuclear is relatively carbon free, the purpose of this levy would not just be to reduce emissions but to prevent wastage’.  It goes on ‘The likely location of any nuclear new build means that it may well be located far from existing demand. Such a levy would serve to encourage innovation in finding uses for this waste heat. This may well lead to new partnerships with industry.’  

It also says that after 2020 no coal station should be allowed to be built without carbon capture, and all must have CCS by 2025. And it wants more gas storage. Plus support for micropower- see below- but in this case it seems, with a proper FIT for small projects.

The review notes that its supply side measures will ‘not be enough to fill the forecast generation gap without strong action on the demand side’ and it was some of those that the media picked up on- particularly the green taxes like VAT on airflights. HIPs would go, but EPC’s would stay and there would be special ‘Low Carbon Zones’ and a new fast-track planning regime. The review says ‘Some of the measures we propose may not be seen as politically palatable but now is the time to start serious consideration of their implementation’. It adds ‘Even those for whom nuclear energy poses few problems should be concerned when it is wrongly seen as a silver bullet avoiding the necessity for radical change. In that sense it is another add-on solution, at best inferior to making the fundamental changes which ought to be our first priority. Nuclear or not, those changes have to be made.’

Competitive Feed-In Tariffs  

The Review says: ‘Having reviewed the alternatives, we believe that the NFFO approach which is similar to feed-in tariffs was more successful in bringing forwards a range of technologies at competitive prices. New fast-track planning procedures, already announced by the Government and likely to be strengthened by a Conservative administration, should significantly reduce project delays and thus remove a weakness of the NFFO system. We propose, therefore, a system of feed-in tariffs which would have separate bands for a range of low carbon technologies. Within bands, successful applications would be determined by competitive auctioning for allocations of fixed periods. The technology bands, amounts for each band and periods over which they operate will be decided by the new independent Climate Change Committee, already promised by the Conservatives. We would anticipate that they would allocate bands to wave and probably tidal sources. We would also expect the Committee to review the part to be played by co-firing and biofuels, ensuring that the maximum carbon savings were derived. Finally, there needs to be a mechanism by which support is withdrawn when either a particular technology reaches market competitiveness or, after a specified period, looks unlikely to reach it. The new Climate Change Committee will also need to make these decisions.’

Onshore wind 

‘Onshore wind is now at market competitiveness with internal rates of return (IRR) hitting 25%, and so should receive no further support through the proposed banded competitive feed-in tariffs. The EU ETS and carbon levy will continue to ensure that it has an advantage over carbon based forms of generation. Furthermore the planning procedures it has found so onerous will be speeded up under our planning proposals. The withdrawal of support for onshore wind excludes small scale wind turbines, including building integrated wind turbines which are not yet commercially viable, and which would also be supported by feed-in tariffs.’ 

Micro power  

'We propose the removal of existing measures and their replacement by the introduction of feed-in tariffs for small-scale microgeneration up to 50kWp. Larger microgeneration that can support a number of properties would be supported through the competitive bidding system. Transparent feed-in tariffs would allow a generator to know in advance how much they would receive per unit of output. They would be set annually for each type of technology and once set will gradually reduce over a 15 year timetable, until termination of the scheme. This timescale would ensure that a product has sufficient time in which to become market competitive but should ensure that uncompetitive, inefficient products do not become a drain on public finance. The costs would be borne by UK electricity consumers in the form of a new ‘clean energy or renewable development premium’ to existing bills.’ It says that ‘The cost would be transparent to consumers and much simpler to understand and cheaper to administer than the complicated ROC system’. Such tariff systems provide long-term security of income to investors with guaranteed rates of return. This would in turn facilitate the development of low interest credit and loans to pay upfront capital costs from a range of third parties. It would also remove market dependency on the stop-start nature of Government grants.’ 

Severn Tidal Barrage  

‘We are not yet persuaded that the energy could be harnessed at an acceptable environmental cost but there is a need to monitor closely new developments here and in Morecombe Bay as advances in technology may well shift the balance of advantage. In the battle against climate change, it is not sensible to rule anything out.’ 

Tory green plans 

At the Conservative Party Conference last Oct, Environment shadow Peter Ainsworth said ‘we will adjust distorting subsidies for on-shore wind farms and ensure proper competitive tariffs for emerging renewable technologies’. In addition he said ‘We want to reward households which switch to renewable energy by introducing a system of feed-in tariffs which will dramatically boost the market for local energy’ adding that ‘it means that individuals who go to the trouble of installing renewable energy in their homes will be rewarded with a real opportunity to sell any excess energy they generate back into the grid’. He also said they would ‘introduce a power station waste heat levy that will encourage the capture and use of heat which today is just thrown up into the sky’.

*In Dec. the Party released Power to the People, its policy on Decentral Energy: it backs REFIT for projects < 250kW.  More on that in Renew 172.

Green Lib Dems  The Liberal Democrats have also been offering green policies. They backed a plan for a Carbon-neutral non- nuclear Britain with 30% of the UK’s electricity coming from ‘clean, non-carbon emitting sources’ by 2020- rising to 100% by 2050. They also want taxes on highly polluting cars, a climate charge for domestic flights and a toll on road freight. See  the Groups section in Renew 171.