Dazed and confused? The UK’s Energy Policy Needs a Sense of Direction
In relation to the rest of Europe, the UK’s role as market champion, nuclear champion, and shale gas champion has brought its policies into sharp relief in contrast to countries such as Germany and Austria. In particular the decision to approve Hinkley Point has been challenged on the basis of the subsidies it requires, although it was allowed by the European Commission.
Over three-quarters of people in the UK support renewable energy, while only a third support nuclear, and a quarter support fracking, according to the UK Government’s public attitudes tracker in 2014. Sparks fly in the energy debate as people’s bills rise, companies’ domestic supply profits increase, and the replacement of the ageing system mean large-scale investment is required.
The UK’s confused energy policy
Big utilities still dominate the UK’s energy policy, as community-owned renewable energy struggles to gain a foothold despite the barriers. It has only been 25 years since the privatisation of energy, but in mainstream politics and media, the rise of community-owned energy, or local authority owned energy, is seen as a minor contribution to the UK’s energy system – around 3GW by 2020 is estimated by the Department for Energy and Climate Change. This will have to change if the UK is to realise a decentralised renewable energy system that meets more stringent climate change emissions reduction targets, and is efficient and fair.
Energy production in the UK
A dash for gas-fired power stations was supported by the UK Government a while ago. Opencast coal mining is still being applied for, and applications for shale gas, coal bed methane, and even underground coal gasification are all being encouraged by the current framework in England, although Scotland and Wales have both passed moratoriums on fracking. Public opposition to fracking is on the rise, particularly in places where proposals have come forward. In places like Balcombe, Sussex, the threat of fracking has kick-started a campaign for locally-owned solar energy instead. In early 2015, solar powered the equivalent of 2 million homes in Britain, and renewable energy generation was at record levels in 2014. Electricity generation from renewable sources increased 30% between 2012 and 2013, up to 13.9% of gross electricity consumption.
Lights going out?
The fear of “lights going out” has led the current Government to prop up the existing utilities. Through the capacity market the utilities are being subsidised in effect for what they want to do anyway – which is keeping their existing power stations open, and then being paid in addition for the electricity they supply. These recently announced subsidies for nuclear and the capacity market show how strongly the utilities are fighting off any change to the current centralised energy system.
The market focus
Both main political parties in the UK are wedded to a system which relies on a market dominated by the big six energy companies. The problem with this approach is that the existing players in the market have all the advantages, and the benefits of pre-privatisation investment – for instance in the grid, while new entrants are expected to pay the cost of transformation. There are regular reports from owners of prospective community-owned renewable energy projects who are quoted astronomical sums in order to be connected to the grid, because the grid is apparently ‘at capacity’ – for instance in places like Cornwall.
Barriers in the system
There is no merit order where renewable electricity is prioritised for connection and supply on the grid. Supplying electricity is impossible for small producers because of the cost of the supply license. The UK Government through the Department of Energy and Climate Change has had working groups on supply, grid and community ownership, but so far there has been no structural change. In the last year the changes to the subsidy regime and the planning regime have effectively stopped onshore wind development and are slowing down solar farm development. The community energy sector itself is responding by looking for new business models when the existing registered projects are built out this year.
What does this mean for energy transformation in the UK?
The relationship between the Climate Change Act 2008 and its carbon budgets and the Energy Acts mean that the focus for the UK Government is on ‘decarbonising’ electricity, but not specifically on renewable energy generation. Instead the main political parties prefer to keep their options open, with a bit of everything in the mix. This creates a huge sense of uncertainty – will fracking squeeze into an energy supply gap which may open up, or will renewables and energy efficiency take off to an extent that it is squeezed out? Will a new generation of nuclear come to pass or will it be finally killed off by cost and insurmountable waste issues? Can the grid and supply systems cope with more renewable energy? With the cancellation of the carbon capture and storage programme, and the nuclear programme on the rocks of ever increasing cost, there is a real risk that the UK will find itself at the back of the queue on transforming its energy system to be largely renewable.
The new UK Government will have to tackle these issues head on as people’s energy bills rise, new energy development comes forward, and as more people engage with community energy and understand the barriers it faces. Anti-fracking campaigners will ensure that unconventional fossil fuels remain high on the political agenda, and the pure cost of new nuclear may render it unaffordable. “Community energy” is largely off the agenda, but there is a focus on infrastructure investment which may re-open the debate down the line.
The UK needs to put renewable energy first in connecting to the grid, make it mandatory for schemes to offer a share to local communities, and make it simple and affordable for local projects to supply their local community. If this happens, community energy will start to transform the way people produce and use energy in the UK.
This article is part of the Heinrich-Boell-Stiftung series on "Energy Transition Around the World".