UKERC – So what will and should a true-blue energy and climate change policy look like?

Along with many of the political pundits I thought I would be writing this blog today full of uncertainty as to which combination of the energy and climate policies in the party manifestos would be going forward. In the event we can turn from these speculations and focus on how the Conservatives are likely to tackle the twin issues of energy and climate change.

Before the election David Cameron, along with the other then leaders of the major parties, signed a commitment to the greenhouse gas reduction targets in the Climate Change Act. It will not be easy to keep the Conservative parliamentary party behind that commitment, as the experience of the coalition showed, and a reasonably early sign of how troubled these waters will prove will be the Government’s response to the Climate Change Committee’s proposed Fifth Carbon Budget, due at the end of 2015.

On the assumption that Cameron’s commitment to carbon reduction stands, there are a number of real puzzles to be addressed by the incoming Secretary of State, now announced to be Amber Rudd. The first is how the new smart grid is going to affect the consumer demand side of the energy system. On the plans of the previous government, by 2020 every household in the UK will have a smart energy meter. How will this affect energy behaviour? Will consumers, becoming more aware of their energy consumption, start to use it more efficiently? Will they be prepared to shift their demand, or allow the power companies to shift it for them, to smooth the daily energy demand profile? The answers to these questions will depend in no small measure on how the roll-out of smart meters is implemented. By 2020, and perhaps some years before, we will know at least some of the answers.

Related unfinished business from the last parliament is the extent to which demand-side response (DSR) is going to be able to play a role in the capacity auctions provided for by the Electricity Market Reform (EMR). Given the Conservatives’ commitment to keeping energy as affordable as possible, one would expect them to try to wrap this up in such a way as to enable DSR, when cost-effective, to make as large a contribution as possible. But the mechanics of implementation of this will not be easy.

Finally on the demand side, there is the ongoing challenge of making the UK building stock – residential and commercial, existing and new – more energy-efficient. The Green Deal introduced some important innovations – Pay-as-you-Save, certification for installers – but got very little take up. There are few signs that the new Government will be willing to subsidise much energy efficiency installation, any more than the last Government did. And there is little evidence from anywhere that, without such subsidies, household energy efficiency, at least, can be improved on the scale necessary to reduce emissions sufficiently to meet the later carbon budgets, or to decrease fuel bills, on the scale required to make serious inroads into fuel poverty.

On the supply side, much of the necessary institutional framework was put in place by EMR, and the industry will be fervently hoping that policy makers now let this work without further political intervention. The days of subsidies for onshore wind seem limited, which will be a real challenge for that industry, and risks needing to give far greater subsidies to other low-carbon generation options if the carbon targets are to be met. Another as yet unresolved potential conflict with the carbon targets will arise if the new Government succeeds in its ambitions to stimulate a new shale gas industry in the UK. To sure, such an industry could help to supply UK gas over the next couple decades, while there will still be considerable need for the fuel. But thereafter gas will need to give way to real low-carbon energy, unless CCS is by then commercially proven at scale, but even that will not help with emissions from households.

The new Secretary of State will therefore have a full and challenging agenda. The UK Energy Research Centre (UKERC) wishes her well in her efforts successfully to address the energy trilemma: decarbonisation with energy security and energy affordability for households and industry. UKERC will be available as and when required to give advice.

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Paul Ekins is Deputy Director, UKERC and Professor of Resources and Environmental Policy and Director of the UCL Institute for Sustainable Resources

This blog was originally written for UKERC and published on its website