The UK’s Energy Market Reform was introduced for two main reasons: concern that inadequate private investment under the liberalized system was eroding the UK’s security of supply, and growing recognition that the existing system of Renewables Obligation Certificates (ROC) support was an inefficient way to support capital-intensive, low carbon investments like renewable energy. The EMR was intended to address these concerns. Contracts-for-Difference (CfDs), providing a long term fixed-price contract, were introduced to enhance investor confidence and thus reduce financing costs; CfDs were seen not only as a preferable way to support renewable energy, but also one applicable to nuclear energy. The Capacity Mechanism introduced fixed payments to all plants guaranteeing power available when needed. (more…)
Innovation is one of those uncontroversially good things that politicians love to champion. For those worried about the economy, innovation is agreed to be a fundamental driver of long-term economic growth. For everyone worried about the environment, innovation is crucial for decoupling that growth from environmental damages, and achieving the deep reductions in emissions that are necessary.
So far, so much agreement. But academics, policy analysts and commentators have often disagreed about the detail of how best to drive innovation, particularly in clean technologies. There are some economists who argue that, beyond some support for basic R&D, government should be involved as little as possible. They argue that innovation is too uncertain for governments to engage in: it’s private actors that should take on the risks and rewards of developing the technologies and systems of tomorrow. After all, who other than businesses can really know what consumers will demand? (more…)
There is growing bewilderment practically everywhere about what the still relatively new UK Government is doing is respect of energy policy. The mantra since the election is that energy policy is to be re-set to achieve decarbonisation targets, to which the government says that it is still committed, in a more cost-effective way that will benefit the ‘hard-working families’ to which the government says that it is also committed. Unfortunately it is quite impossible to recognise this laudable objective in the policies that have so far been implemented, especially those which use those policies called economic instruments – basically taxes, charges and subsidies – which are the subject of this blog. (more…)
The 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. (more…)