The dangers of energy 'targetism'

Tuesday, 18 December 2012

The dangers of energy 'targetism'


I hate to disagree with Tim Yeo, green NGOs and Students for a Free Tibet on energy policy, but on this issue I do. Yeo's proposal to amend the upcoming Energy Bill to include a 2030 decarbonisation target for the electricity sector is the wrong choice.

The first question is whether such a target matters, particularly to those considering whether to build UK factories churning out wind farms and other low carbon technologies. The Committee on Climate Change proposes that the target should sit in secondary legislation, with several caveats to amend it if the costs of technologies change or non-electricity sectors decarbonise more quickly.

The Energy Bill already offers low carbon generators a guaranteed 15-year (or more) price for electricity. That seems like a lot of consumer-paid-for certainty to me. Moreover, the Climate Change Act is the strongest commitment in the world to decarbonisation. Will a heavily caveated line in secondary legislation really provide any additional confidence?

Secondly, the push is part of the broader malaise - the insatiable demand for more and more detailed targets in energy policy. This 'targetism' is not satisfied with the 2050 emissions target in the Climate Change Act, or legally binding EU carbon commitments, or a European Renewable Energy Target, or G7 commitments. It is not satisfied with the guaranteed prices for wind farms and nuclear provided in the Energy Bill. To be honest, it is unlikely it will ever be satisfied until the Government specifies exactly how much it will support each separate technology over the next 40 years, turning its 'indicative' pathways and roadmaps into firm laws.

Such targetism fails to recognise that it is impossible to predict, no matter how brilliant your modellers, what will happen in the energy market over the next 30 years (or the next two years, for that matter). Neither the recent drop in the cost of solar nor the dash for gas in the 1990s were predicted by government experts. There is simply no way of the Government knowing enough to make the correct decisions.

Such targetism is not just a source of conflict for renewables or nuclear. Amid the fight about whether we will have 37GW of gas by 2030 on the system, it is important to remember that Government does not actually build these things any more. The most important line in the recent Gas Strategy is: "The role gas plays will be determined by the market". The honest answer to the question, how much gas will be on the system in 2030 is 'we have no idea' (although the Energy Bill means government decisions will play an increasingly important role).

It is worth interjecting that the dispute over UK shale gas is essentially irrelevant to the decarbonisation target. There is both huge potential and huge uncertainty about what role shale will play in the UK. We may find huge deposits, but ship them abroad to displace coal. We may find little. The point is not that we decide now if shale or other technologies will be important, but government sets up a system that can take advantage of potentially cheap energy while not sacrificing our climate targets. The best system we know for dealing with such uncertainty is a market, a deeply unfashionable idea for many in the energy debate. It also means EU-level carbon pricing, probably through a cap, rather than unilateral UK sub-targets. Any extra effort in the UK's electricity system to decarbonise just allows less effort by other European countries. If a Europe-wide cap is in place, a UK decarbonisation target's effect on global emissions  -- the problem we are trying to solve -- is nil.

Of course, the real reason for the demand for a decarbonisation target is political. Industry has lost confidence that some Conservatives are serious about climate change (or more particularly subsidies for renewables). Privately, senior officials in DECC and the CCC concede they are pushing for the target because they worry about the Treasury and, in particular, George Osborne's commitment to climate action.

This is a pity. Senior members of government could be making a stronger case that current policies are supporting the move to a low carbon economy, while ending distorting subsidies and protecting consumers. Sadly, they are not. While this may explain Yeo's embrace of targetism, it does not yet justify it.

This article originally appeared on Business Green's website

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