Now is not the time to pull the plug on supporting renewable energy. A few years of vital subsidies cannot make up for a century of support for fossil fuels.
The sun sets at Hinkley Point nuclear power station.
The UK government has admitted it is subsidising nuclear as it continues to cut subsidies for renewables. Photograph: iVistaphotography /Barcroft
The entire global energy system is undergoing a clean revolution. The old certainties of centralised power and fossil fuels are falling apart before our eyes. In Paris last week world leaders set legally binding targets to decarbonise their economies in order to keep temperature rises at a maximum of 2C. The future is almost here.
It’s a future that is necessary and one that presents the economic opportunity of the century. Bloomberg NEFs New Energy Outlook for 2015 estimates that renewables alone will see more than $8tn of investment in the coming years with $3.7tn in solar alone.
Until recently the UK seemed to understand this, however imperfectly. In the second quarter of this year, the UK got 25% of its electricity from renewables and is aiming for 30% by 2020. The last two governments deserve credit for that.
But with the industry on the cusp of the mainstream, the last six months have seen a radical, dangerous U-turn from the government. Onshore wind and large solar have seen support removed and applications blocked through planning; the climate change levy exemption was removed from renewable electricity scheme; the zero carbon homes target and energy efficiency schemes have been scrapped; the Green Investment Bank is threatened with privatisation, tax relief has been removed from community schemes. And on, and on, and on.
The government’s line is that it’s time to pull the plug on supporting renewable energy – as if a few years of vital subsidies can make up for a century of economic and infrastructural support for fossil fuels. Renewable energy, like most industries, needs some government support to get going, and to realise the best results. Think of the tax breaks and research grants still given to oil and gas, the direct subsidies for nuclear, the publicly-funded roads that facilitate cars, or the national space programmes that eventually brought us the mobile phone.
The argument that this U-turn is about protecting consumers’ bills simply does not hold. Cuts to rooftop solar announced on Thursday will save just 0.9% off a yearly bill, by 2020.
Many of the alternatives the government is turning to are actually more expensive than renewables – Hinkley Point C would cost consumers twice the current wholesale price of electricity. And the single best thing that would cut bills – insulating homes – has seen just about all public support scrapped.
Contrast the rhetoric on renewables with the huge support for fracking and nuclear and it is hard to avoid the conclusion that the government has its favourites.
All this is hurting people, investment and business. About 20,000 people could lose their jobs as a result of the latest changes to rooftop solar. Entrepreneurs and investors may walk away from the sector , and who could blame them? A vast amount of human capital in skills, training and motivation will be wasted. EY has repeatedly warned of the devastation that ministers are causing, deliberately or not, to inward investment.
In response to criticism that it has been cutting support for renewables the government is now talking up innovation, highlighting a plan to double investment in clean energy research and development (although much of this seems to be for nuclear).
But innovation isn’t what you do instead of supporting investment today. It’s not either/or. It is no accident that those countries with the largest renewable manufacturing industries also have thriving local markets. Innovation comes, in part, from getting on with it.
The cost of solar has fallen by 80% in just the last few years – driven in large part by rapid learning and scale deployment thanks to the support of governments worldwide. In the UK researchers across the country are always looking at new ways to make renewables even cheaper and more effective – from super-efficient perovskite solar cells in Bath, to graphene materials in Manchester. In other technologies, from tidal energy in Orkney and new forms of offshore turbine foundations in Glasgow and Blyth – progress is continuing on hundreds of fronts.
And the opportunities provided by renewables are much bigger than turbines and panels. These are disruptive technologies that open huge new avenues. The industry that has been born by the smart phone is not just chips and handsets, but in software, services and dating apps. So too with renewables.
Businesses that can get the most from the large amount of renewables already in the system could do well. Energy storage and smarter grid management are two of the hottest areas for businesses looking to take advantage of the recent surge in renewables, since they can improve the economics, and store power for those times the sun isn’t shining or the wind doesn’t blow. Schemes are being developed in which people are paid an annual fee for access to a home battery, which when aggregated into their thousands can be used to help balance the grid.
Yet these opportunities are only available thanks to the rapid growth we have seen in recent years, and to continue the sector needs stability and political support. If the government really wants innovation continue, it needs to provide both.
In the long run? We’ll be green. Solar and its friends will triumph, and one day will undoubtedly to be some of the biggest industries in the world, including in the UK. In meantime businesses will need to be resilient.