Publishing its report ahead of the announcement by Lord Turner next week of the UK's first l
ow carbon budgets, EEF, the manufacturers’ organisation, is urging the newly formed Department for Energy & Climate Change (DECC) to take the opportunity to take a more strategic approach to developing energy policy.
To back this call, EEF has a made a number of recommendations which will provide better value for money for the taxpayer and energy consumers and help the UK take advantage of business opportunities.
Commenting, EEF Chief Economist, Steve Radley, said:
“Energy policy is at a crucial juncture. The urgent need to reduce carbon emissions is now widely accepted, but the significant cost of transforming our energy supply system is becoming increasingly apparent. Continuing the current approach to low-carbon energy policy will result in unnecessary costs being incurred and could ultimately undermine support for addressing climate change.
“Government must seize the limited window of opportunity still available to chart a better course by adopting a strategy which places cost-effectiveness and exploiting business opportunities at the heart of policy.”
The costs of expanding low carbon energy will be considerable. For example, estimates of the cost of meeting the UK’s share of the proposed 2020 EU renewable energy target, to which the Government has publically committed the UK, vary between £4.4bn and £24.9bn of additional expenditure per year by 2020.
In addition, whilst there is considerable commitment towards creating a low carbon manufacturing base, there is no industrial policy to deliver it. As such, government must adopt a strategy which places greater emphasis on cost-effectiveness whilst maximising the business opportunities created by emerging energy technologies.
Key recommendations:
1. The UK must be more open minded about how emissions are reduced and avoid an excessive focus on renewables. Policymakers should be setting targets for the expansion of low-carbon energy, whatever the source, rather than mandating a specific share for renewables and avoid creating barriers to the deployment of clean coal technology.
2. The Renewables Obligation needs to be reformed to reduce the uncertainty it creates for investors and limit its tendency to overcompensate renewable generators.
3. Any subsidies should be more discriminating and focus on the most cost effective technologies. For example at the domestic level the emphasis should be on renewable heat rather than electricity.
4. A clear industrial strategy is needed which identifies priority technologies and backs them up through public procurement and targeted support for supply chains. Government also needs to think creatively about how the public sector can be a consumer of low-carbon energy. The US Navy’s trialling of wave power, and plan to roll out the technology across its bases worldwide if the demonstration is successful, is a good example.
5. Funding for energy related R&D should be increased and made more accessible to business. At the moment for example there are too many bodies with overlapping remits involved in energy R&D support.
“Taking advantage of businesses opportunities is integral to a successful low-carbon energy strategy. Not only will it offset the cost of subsidising renewable energy, by delivering tangible economic benefits it will help maintain support for climate change policy and provide an attractive model of a low-carbon economy for other members of the international community to follow” added Mr Radley.
ENDS