The energy battle
The Bali summit: Why is the British government's energy policy not delivering on its climate change targets? Because it has been nobbled
The beautiful resort of Nusa Dua, Bali, is the scene this week of a battle of world-wide significance. Yes, it's yet another UN climate conference.
We're all used by now to how these things involve the spouting of giga-tonnes of hot air, and this one promises to be only slightly different. The IPCC report issued two weeks ago was the last warning salvo fired by the scientific community before the talks, and its most extreme warning yet. But no one expects any big breakthroughs.
The British position for Bali is to support the Washington Declaration but to expect to wait at least a year for progress, and hope that President Bush's successor will be more on board.
Away from the sun-kissed beaches of Indonesia, though, the action that's more of relevance to us in Britain is happening closer to our rain-drenched shores.
An assessment by the EU of progress towards the pitiably modest Kyoto targets shows Spain leading the way among the 26 member states, with the UK in the lower half - 10th from bottom and 16th from the top.
Why has Britain falled behind on renewable energy and carbon emissions? Why has the government seemed to say so much yet do so little? Why is the government expecting to build more nuclear power plants, and rely on carbon capture and storage to capture the rogue gas and bury it underground or at the bottom of the sea?
Why is it going to argue in Europe during the next few months that the UK must not have to reach the European target of 20% of renewable electricity by 2020?
These are the fruits of a bitter dispute at the heart of UK energy policy development, in which support for new nuclear build, gas and carbon capture is pitted against support for renewables (in which a feed-in law should have a rightful place). The lobbying battle has been led by the conventional energy industry giants and the nuclear industry.
These companies have successfully nobbled both BERR (the Department for Business, Enterprise and Regulatory Reform) and the Treasury. They have not nobbled Defra, which has responsibility for climate change but not energy. Defra, and many back-benchers in parliament, support a feed-in tarriff, but whenever such a question is addressed to energy minister Malcolm Wicks, as it has been several times this month in parliament, he bats it away very smartly, and talks like a robot about the Renewables Obligation, partly because the energy giants (Eurelectric et al) have mobilised a fresh campaign against feed-in tarriffs.
A feed-in tariff simply guarantees producers a fixed price for electricity generated from PVs (solar panels). It was introduced in Germany in 2000, and revised in 2004 to cover the full costs involved in producing solar electricity, sparking a boom. Germany will have almost 20 times as much PV by the end of 2007 as in 2000 when there was just 44MW, according to the German Solar Industry Association. It has led to around 800,000 properties having the technology installed and 55% of the world's photovoltaic power is generated on solar panels set up between the Baltic Sea and the Black Forest. Just what we need here.
Both the Conservatives and the LibDems have made feed-in part of their policy. But in the UK we have the Renewables Obligation, which is supposed to compel suppliers to purchase an increasing proportion of electricity from renewable sources. In 2006/07 the proportion should be 6.7% (2.6% in Northern Ireland) rising to 10.4% by 2011-12. But actually we are behind this target. The Obligation has often been criticised for being ineffective, bureaucratic, slow, and in particular excluding small generators such as householders.
Which is just how the large energy producers like it - they don't want a lot of microgeneration schemes all over the country. Good grief, if everyone is making their own electricity, who is going to buy from them? And the unions agree. It's worth noting that the unions are well represented in the conventional energy industry, with coal and nuclear carrying significant union membership. But the UK renewables industry has no union. Conversely, the big energy companies are all members of the only lobbying bodies the renewables industry has, their trade associations.
There have been any number of well-researched reports showing how Britain can meet and exceed its climate targets, from Zero Carbon Britain to last week's Home Truths report from Oxford University. But instead the government will be resurrecting civil nuclear power - just as seven of the UK's 16 nuclear power plants are off-line for repairs and maintenance.
The comeback of nuclear power is based on the allegation that it is almost carbon-free. The Treasury has accepted evidence that its lifecycle carbon emissions are equivalent to those of wind power: between seven and 22g CO2/kWh.However, extensively peer-reviewed empirical analysis of the energy intensity and carbon emissions at each stage of the nuclear cycle has produced much higher figures. In fact, nuclear power produces roughly one quarter to one third as much carbon dioxide as the delivery of the same quantity of electricity from natural gas, ie 88-134g CO2/kWh. Gas-fired electricity production involves the emission of around 400g CO2/kWh.
Nuclear is still lower than gas, but nowhere near wind.
However, don't expect the government to listen to this. It has already decided, in a mind-bogglingly cavalier fashion, that it is fine to proceed with new power stations. Why? Because the present government will not have to foot the construction costs or the clean-up bill for these power stations (we already have a £73 billion bill for the current clean-up costs).
Meanwhile the energy companies have persuaded the government to persuade Europe - in the second round of the Emissions Trading System (ETS) - to create a new set of certificates which will pretend to save carbon but make them money. For each kWh of green electricity produced, the producer can ask a competent national body to issue a green certificate. This can be traded and will be counted towards the national target in the country into which the certificate is sold - a developing country, most likely. The country from which the certificate originates will not be able to count it under its own national target achievement plan. In this way, the energy cartel vigorously defends a domestic system which blocks out everyone except themselves.
The biggest success of the Emissions Trading System so far has been to generate profits for the big energy companies. No wonder they love it. A report by Open Europe, in July 2006, found that profits were £10.2m for Esso; £17.9m for BP; and £20.7m for Shell. Conversely, smaller organisations like hospitals and universities, who had been given far fewer credits, were forced to go out and buy them - while the price was still high. So, for example, Manchester university spent £92,500.
The permits to burn fossil fuels were given away to 5,000 of the EU's biggest polluters. At one point, the price of permits rose to €27 per tonne, making the whole distribution worth €177 billion. This inflated their profits and enabled them to out-compete cleaner, less energy-hungry firms. It also enabled them to finance further lobbying in the manner described above. If, instead, the emissions permits had been given to every EU resident, we could each have been better off by up to €280 a year, Irish sustainable development group Feasta has calculated.
As for carbon capture and storage (CCS), the big energy companies would love to count tonnes of the gas buried as qualifying for allowances under the European Emissions Trading Scheme. Yet a draft of the European Directive on the topic, due to be presented by the Commission in January, says that although it will be included in the ETS, credits won't be allowed, on the grounds that the technology is "immature".
One high-ranking Commission official close to the work recently admitted that the Commission "has perhaps been too optimistic" on CCS and that making the technology viable is going to be "more costly and more complicated" than initially thought," says Euractiv, the independent Brussels media portal. Our government has meanwhile tendered for a demonstration project and is working with Norway in the North Sea on CCS projects.
So all of the policies lobbied for by the large energy companies are of dubious value in reducing carbon emissions, yet they are about to be enshrined in law in the Energy Bill, while the Climate Change Bill, although it makes many provisions, doesn't actually contain any proper policies.
In my opinion, only two central policies are required, from which all other policies and implementations could follow.
The first is the feed-in law referred to above. The second is cap-and-share (or TEQs - Tradeable Energy Quotas). They both involve taking the choice out of consumers' hands. What? I hear you say. We can't do that! But educating consumers to buy energy-saving products is not sufficient. As long as the products are on the market - and patio heaters and digital gadgets will be - people will buy them. Especially if they've saved money by saving energy - they're bound to spend it - and all spending involves an energy quotient.
So what do you do? You allocate a cap on the amount of carbon that can be emitted in the country, and reduce it year by year. You apportion that amount to each individual and let them spend it. Two main systems of doing this are competing for adoption. In Ireland, cap-and-share is the successful one, and AEA Environmental Consulting has just announced that it has won the job of producing a feasibility study on its implementation over there. Cap-and-share lets individuals choose whether to destroy or sell back to energy producers their allowances. These companies (and there aren't many) can only emit the carbon thus permitted.
Under TEQs being trialled in several communities in the UK, individuals spend their allowances whenever they purchase energy. If they outspend their quota in a year, they must buy more off those who haven't. This system engenders more consumer awareness of how their activities use energy.
Both policy solutions take power from the energy cartel - literally - not to mention their gravy train. You can see why they don't like them.