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Future Energy – UCL ISR


Perspectives on low-carbon future energy systems and sustainable development


UK energy policy: rationalisation or politicisation?

By ucftmgr, on 30 September 2015

A James size A3The conservative government inherited a problem in energy policy. So did the coalition government before it. As so often, the coalition’s solution to the problems inherited from the 2000s have fed the concerns of its successor, and the new government has set about changes with zeal: the first hundred days saw the end of subsidies to onshore wind and changing planning laws, requiring renewables to pay the climate change levy, initiating drastic cuts to feed-in tariffs, scrapping the ‘Green Deal’ and zero carbon homes policies, and deferring this year’s auctions for new renewable energy capacity.

This blog sets the scene for a series of contributions by UCL to the national debate, culminating in a report to be released in late Autumn. We will summarise the nature of problems the government inherited, pinpointing two major mistakes in the Coalition’s reforms – one of which set the scene for what is now being termed the ‘hard reset’ of energy policy. The official position of the new government is that it is engaged in a necessary and appropriate rationalisation of UK energy policy, in particular to enhance its economic efficiency.

However the new government’s moves have alarmed investors and created the impression that the it is engaged in a war on renewable energy in particular, and potentially energy efficiency policy as well. If true, this in turn would create a fundamental inconsistency between the government’s on-the-ground energy policy actions, and its high-level commitment to tackle climate change, take a strong stance in the EU and at the Paris COP21 climate change summit, and to support the Climate Change Act and deliver on existing targets (notably the Fourth Carbon Budget legislated by Parliament under the Act, and reaffirmed last year).

Is the new government correcting past flaws whilst taking a strategic view on how best to increase the efficiency and effectiveness of UK energy policy? Or is it becoming captured by the politicisation of energy and environmental debates that has bedevilled US policymaking, in which environment and sustainability issues become a political football, undermined as part of struggles between conflicting ideologies and interests?

Because energy is such a long term sector, politicisation – which erroneously casts the choices as being between economy vs environment, present vs future, individual vs social, and private versus government – would carry a high cost. Such divisions would inject fundamental uncertainty into the investment landscape, raising perceived investment risk and costs for all; and could in turn be exploited and enhanced by the vested interests of present incumbents.

At present the jury is still out on the question of where conservative UK energy policy is really heading, and the dominant motivations behind it. Many of the ‘hard reset’ steps initially taken are understandable in context. What really matters is what comes next, and whether the government bases its future policy on robust evidence, of the sort that can transcend the efforts of others to politicise the agenda.

In that vein, this blog will be followed by a series of contributions from leading UCL researchers summarising key lessons about the main pillars of energy policy – energy efficiency, the use of economic instruments and design of markets, and strategic investment in innovation and associated infrastructure.

In the course of this work, we will also review briefly recent publications – including a policy paper by Dieter Helm on ‘The first hundred days’, and the influential Policy Exchange report, ‘The consumer is always right’. We note already the risk that Helm’s approach could itself contribute to a politicisation agenda, not least by describing the last Parliament’s UK Energy Market Reform (EMR) as the ‘Milliband-Huhne-Davey’ bill, when it was in fact adopted by full cross-party support, following Ofgem’s warning in 2009 that the previous energy market structure could not be relied upon to deliver either security or low carbon investment. Indeed, Helm’s own writings suggest that he has actually supported all four core element of the EMR. We note also the tension in the Policy Exchange report, which initially focuses on the costs of government policies but not the benefits, and then recommends increased efforts on energy efficiency: our contribution presents new analysis of both the costs and benefits of historic UK energy efficiency programmes to contribute to an integrated appraisal.

We do not agree with all the changes announced in the first 100 days, but acknowledge the legitimate concerns which drove many of them. We offer this series as UCL’s contribution to a crucial national debate, and offer some key tests as to whether the government’s ‘hard reset’ in reality heralds a rationalisation, or a politicisation, of the UK energy policy landscape.

Prof Michael Grubb is Professor of International Energy and Climate Change Policy at the UCL Institute for Sustainable Resources

Due to appear at weekly intervals, further blogs in this series will comprise:

  • The first pillar of energy policy: Energy Efficiency, by Peter Mallaburn and Ian Hamilton
  • Economic instruments and pricing, by Paul Ekins and Paul Drummond
  • Energy market reform and onshore renewables policy, by Michael Grubb
  • Innovation, infrastructure and the challenge of North Sea wind energy, by Andrew Smith and Will McDowall

These will then be brought together in an overall report entitled ‘UK energy policy: rationalisation or politicisation’, in which each of the blogs will form the basis for a chapter, extended with more detail and in response to comments on the blogs.

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