Let’s tip the balance back towards demand management
Reducing demand is better value than continuing to plough money into increasing energy production. So why do we continue to favour energy production?
In almost all circumstances, it is cheaper to avoid having to use energy than it is to produce it. This is a mantra with which most will be familiar: it has been enunciated by practically every objective strategic energy study for decades. Again this month the European Commission repeated it forcefully, in its magisterial paper setting out the case for a full Energy Union.
So, if demand management is much better value than generating new supplies of energy, why do our political leaders in the UK consistently set out to handicap energy saving – while energetically promoting production?
Time and time again, the mythical level-playing field, for which all purport to strive, is tipped against demand reduction. And in favour of encouraging more energy, more consumption. Here are some of the contrasts visible even over the past year.
First of all, how has the demand side been handicapped? Take the auction procedures for future electricity requirements, under the Contracts for Difference capacity market auctions either side of last Christmas. As a result of a personal intervention by the Energy Secretary
Ed Davey, at the last minute the demand side of the equation was permitted to compete.
But both those offering short-term load management and longer term demand reduction have been seriously hampered by the adoption of very different rules and criteria compared with conventional power station suppliers. Generation got 99 per cent of the money.
On the consumer side, it is evident that the Prime Minister’s alleged description – as reported by the Sun newspaper – and subsequent emasculation of the existing Energy Company Obligation programme as “Green Crap”, is leading to a dramatic collapse in the number of energy saving measures installed in British homes. This winter we are witnessing 80 per cent fewer installations compared with just three years ago.
Approaching four thousand jobs have gone as a result. Nobody in Downing Street has expressed any sympathy. Indeed there have been several snide statements, from un-named “sources close to” senior people, that government isn’t running job creation schemes.
Tax reductions for oil sector
Contrast that with the endless concern being expressed by both the Prime Minister and the Chancellor of the Exchequer regarding the loss of a few hundred jobs in the oil production sector at BP, prefacing the strong likelihood of new tax reductions intended to compensate that sector.
Contrast this too with the way in which the Government is using its new Infrastructure Act to expedite opportunities for shale gas drilling. Witness the way the Chancellor has created a special Cabinet Committee charged with greasing the wheels for the fracking industry – including designating roles for eight different departments of state to ensure swift delivery.
Witness the endless speeches and cheerleading for shale exploration being led by the Prime Minster. This despite the sober conclusion of the key DECC official, Stephen Speed, informing the Commons Environmental Audit Committee that shale gas was “likely to be a very small part of our energy mix”. An assessment endorsed by BP, whose highly respected Energy Outlook concludes there is unlikely to be any significant production of shale gas or oil in the UK for the next 20 years.
Witness too the way in which the Government seems prepared to break all its own rules just to get a first new nuclear power station built since 1984. The British planning system has been “streamlined”.
A new institutional context with promotional offices for developing nuclear has been created at public expense. The Government has ensured that regulators are able to pre-licence designs (Generic Design Assessment), adding to strategic siting and environmental assessments, all intended to smooth the process.
“No subsidy” for nuclear
Yet all this appears to have done absolutely nothing to speed up or make cheaper the construction of new nuclear. The Coalition Agreement stated unequivocally that new nuclear would receive “no public subsidy.” Despite this, the intention is to grant a 35-year price of £92.50 per megawatt hour for the initial power station in Somerset: double the price of electricity paid through consumer bills.
Such a subsidy doesn’t just contradict the official government policy. It also breaches the entire philosophy – long promoted by the UK – of creating a Single European Market where governments simply do not intervene like this to distort markets. This is leading to a challenge in the European Courts by the Austrian government.
Of course, cases can be made for both the shale gas market and new nuclear, even as fringe contributors. But what is so galling is the knowledge that, if just one quarter of the political muscle being expended on their promotion had been devoted to promoting greater energy efficiency, it would certainly have been time far better spent. Certainly in terms of employment. But also in terms of improving our GDP. And in terms of both our industrial performance. And of our nation’s health and well-being.
And, as we head towards this May’s General Election, I am confident it would have won far more plaudits from voters too. Correcting this imbalance between supply and demand must be a number one priority for the incoming government.
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