From the TUC

Renewables industry vents its frustration

22 Aug 2012, by in Economics, Environment

Over 200  business leaders, investors, unions, academics and campaigners have signed a letter to David Cameron and Nick Clegg calling for clear and consistent leadership on renewable energy. It reflects a widely shared frustration as two years of policy instability morphed into open conflict between the Treasury and DECC with the Chancellor’s energy vision for the UK as a “gas hub”.  In July, the Government’s renewables review  was meant to define support levels for a range of emerging renewable power technologies until 2017. The short-termism of this approach is bad enough. But some, such onshore wind and solar power, now have a year or less of firm commitments from government.

For Gaynor Hartnell, chief executive of the Renewable Energy Association behind the letter, “The reasons for doing renewables have evolved over the decade. But right now we are on the cusp of pure economics being the main driver.” And as a new Grantham Institute report on the low carbon economy points out, innovation lies at the heart of low carbon growth. Rejecting government intervention, and ignoring the multiple market failures “undermines markets and cripples entrepreneurship.”

However, the Chancellor wants gas. He called on the environment secretary to provide “a statement which gives a clear, strong signal that we regard unabated gas as able to play a core part of our electricity generation to at least 2030 – not just providing backup for wind…”

But Lord Stern’s team at the Grantham Research Institute says the dangers of this approach ignore the basic economics of low carbon growth.

  • Technology lock-in means that we fail to address the dynamics of alternative innovation and development opportunities essential to economic growth. The choice of technology innovation pathways is crucial to industrial development. The evidence of the past five years points to a faster impact of innovation that was expected at the time of the Stern review – such as the rapid cut in the costs of solar power.
  • Avoided carbon emissions have great value. The future costs of unmanaged climate change are immense, but are insufficiently taken into account in the economics of climate change.

Now is the time to invest, Stern says. Our economy has spare capacity and there is a stock of financial resources available – the UK private sector generated a surplus of £110 billion in 2010, when total UK investment in clean energy by both the public and private sectors was just £2 billion. “The issue is lack of confidence to invest rather than a lack of liquidity.” Hesitation and nervousness in policy undermine confidence.

Stern restates the fundamental argument that the energy and industrial revolution ahead requires policy on carbon. “Policy must begin by correcting the biggest market failure the world has seen – failure to price greenhouse gas emissions.”

The fourth carbon budget for proposed by the Committee on Climate Change for the period between 2023-27 sets a tough target. Now, strong implementation is crucial. Good government policy sets the framework for the private sector to invest on the scale required, and is the driver of change.

Crucially for Stern, “Rejecting government intervention, and ignoring the multiple market failures that are at the heart of this story, undermines markets and cripples entrepreneurship.” To avoid the policy decisions necessary to deal with the key market failures here is, essentially, to be anti-market and anti-growth.

Thousands of jobs are at stake. Earlier this year, the REA report Renewable Energy: Made in Britain revealed that there are currently 110,000 people employed in the UK renewable energy sector, with the potential for a total of 400,000 if we meet our 2020 renewable energy targets.

2 Responses to Renewables industry vents its frustration

  1. John Moss
    Aug 23rd 2012, 10:13 am

    The cry from the Renewables sector that thousands of jobs are at risk is ridiculous. Thousands of jobs were at risk at British Leyland, because they made a poor quality over-priced product which people didn’t want.

    It is only through Government coercion that we are forced to buy expensive, landscape blighting renewable energy. Given we may be sat on huge volumes of cheap gas which would do much to reduce energy costs, the logical short-term thing is to exploit this so reducing energy costs, increasing household disposable income, allowing us to spend more and return to growth, thus perhaps creating tax receipts to support the long-term investment in true renewables like nuclear and tidal power, seems to be beyond the consideration of the Green lobbyists.

  2. Mark Hughes
    Aug 23rd 2012, 2:30 pm

    Another example of the consequences of believing in small, non interventionist government. As the British government stands back advocating the doctrine of free markets, other countries like Germany intervene, create a market for renewables and then become the market leaders in the sector, creating jobs in new industries, which will overtake old industries if history has anything to teach us.

    The decision to stick with gas, is short term expediency at the cost of our long term prosperity, which in itself is probably another example of the failure of our political process which doesn’t support or encourage long term solutions.