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Durham University

Durham Energy Institute

Energy policy under the new Conservative government

Dr Chris Dent is senior lecturer in Energy System Modelling in the School of Engineering and Computing Sciences and Durham Energy Institute Impact Fellow.

14/05/2015


Following the startling events of last week the UK finds itself with a majority Conservative government (an excellent article on what went wrong with pre-election polling may be found on The Conversation[1]). This article examines, based on the Conservative manifesto[2], what may be in store for UK energy policy over the next five years.

The manifesto does not place strong emphasis on energy and environmental issues. Energy policy only occupies two pages (pp 56-57) of the manifesto within the chapter on “Securing your home and your neighbourhood”, and neither it, nor more general environmental issues, are mentioned in the manifesto’s front matter.

The energy section begins with five key commitments, and a page giving an (unsurprisingly) positive verdict on the 2010-2015 Coalition’s performance in energy policy. Within the “energy trilemma”, the emphasis in this is on energy security and affordability. The most prominent mention of the environment is in the final commitment “meet our climate change commitments, cutting carbon emissions as cheaply as possible, to save you money”. Some might be alarmed by the fact that the key environmental point is related directly to saving money, but on the other hand making a given reduction in carbon emissions more cheaply is surely better than making that same reduction more expensively. In this introduction to the energy section, subsequent mention of the environment is then indirect (“All parts of the UK will soon be helping to deliver secure, affordable and low-carbon energy…”, “backing good-value green energy”) and again links the environment to affordability. A notion of green energy as an end in itself is thus not something which the Conservative Party was looking to emphasise to people who might vote for them, however strong their commitment internally.

The key plans described are fourfold:

We will promote competition to keep your bills as low as possible.

  • The main commitment described here is to implement the recommendations of the current Competition and Markets Authority (CMA) review of the energy market. While the manifesto in isolation gives no detail of what this might mean, the Competition Commission has published an “Updated Issues Statement”[3] in which it gives a preliminary view that while it does not see substantial evidence for problems in the wholesale market, it does have concerns that inactive retail customers (i.e. those who do not look around for the best tariffs), and particularly those on retailers’ Standard Variable Rates, may be paying higher tariffs than those who shop around for the best deal. This is a particular concern if, as the CMA express concern, these inactive customers might typically include vulnerable members of society. We might thus anticipate some new form of regulation of the retail market.
  • The manifesto also makes a commitment to ensure that all retail customers have smart meters by 2020, and to provide support for low cost energy efficiency measures including home insulation. The latter is certainly welcome, as in recent years the public debate has been centred more around developing new carbon supply than on increasing efficiency and reducing demand, which is unfortunate given the poor thermal efficiency of much of our housing stock.

We will secure your energy supplies

  • The manifesto commits to supporting safe development of shale gas, and to ensuring that local communities share in the benefits of such developments, including the creation of a sovereign wealth fund for the north of England.
  • The manifesto also commits to providing funding for new renewables technologies, but qualifies this by saying that that this funding will come with a value for money test. The precise meaning of this is unclear, though it could potentially mean a change of policy on the level of technology maturity at which support shifts from research funding to subsidies on deployment (i.e. very early stage technologies will be supported in a purer research mode instead of receiving preferential per kWh or MWh tariffs for deployment).

We will halt the spread of onshore windfarms

  • The manifesto discusses how onshore wind farms “often fail to win public support”. Any government must form a view on the balance between the national benefit which arises from deploying onshore wind as one of the cheapest renewable technologies, and the dis-benefit to the local population through loss of visual amenity. It is clear from the manifesto that the Conservatives intend to prioritise the interests of those living near potential onshore sites.
  • There is also a statement that onshore wind farms are “unable by themselves to provide the firm capacity that a stable energy system requires”. This is a rather curious statement, as exactly the same argument applies to any variable output renewable resource, (including offshore wind) which might provide near-zero available capacity at time of peak demand, and not just to onshore wind whose development the Conservatives will seek to limit.
  • The headline commitment is to “end any new public subsidy for them and change the law so that local people have the final say on windfarm applications.” The meaning of the second part of this seems quite clear, and might naturally result in increased community outreach activity and grant schemes operated by wind developers. The meaning of the former is less clear. It might mean that the current support scheme for onshore wind (guaranteed per-MWh prices implemented through contracts for difference[4]) will not be extended for onshore wind beyond the current stated horizon. However it seems improbable that the government will make substantial reductions in the current renewables support scheme commitments, given the consequences that would have for investor confidence. The need for a stable policy framework was highlighted in a recent DEI response[5] to a Parliamentary Select Committee enquiry on “Future Challenges in Energy and Climate Change Policy”.

We will protect our planet for our children

  • The manifesto makes an explicit commitment to meeting the country’s climate change commitments, including working towards “a strong global climate deal later this year – one that keeps the goal of limiting global warming to two degrees firmly in reach” and supporting the Climate Change Act.
  • There is also mention of cutting emissions as cost effectively as possible (which is clearly a sensible aim), and a statement that a Conservative government “will not support additional distorting and expensive power sector targets”. The meaning of this latter statement is unclear without clarification of what is meant by “distorting and expensive power sector targets”, though it may mean a commitment to reducing overall UK carbon emissions without any specific targets for the proportion of these reductions which come from any one sector.

There is thus a commitment to meeting environmental commitments; however the primary emphasis is on energy security and affordability. While there are synergies between development of renewable generation and energy security (reducing exposure to both volatile commodity prices and imports of fossil fuels from unstable regions of the world[6]), there is no direct evidence that this motivates the plans described in the manifesto.

Several parts of the manifesto discuss research and innovation policy with some relevance to energy issues:

  • Part of the “Northern Powerhouse” economic plan is to “back scientific and technical strengths… and by making investments in energy research in Blackpool, Cumbria and Thornton” (p. 11). This selection of locations might initially seem slightly quixotic, however Blackpool may refer to the National College for Onshore Oil and Gas which is headquartered there[7], Cumbria probably refers to nuclear research on the Sellafield site, and Thornton probably means the Thornton Science Park on the former Shell Technology Centre site near Chester[8]. While it is left unstated, there may also be research and development opportunities for the northern research universities such as Durham.
  • The Energy Research Accelerator[9] is mentioned as a key project in the Midlands (p. 13).
  • A commitment to invest £500m over the next five years towards a goal of almost all road vehicles to be zero emission by 2050 (p. 15).
  • A commitment to spending £6.9 billion on “research infrastructure” by 2021 (p. 21), although it is unclear whether this is the capital budget with operational budget to come on top, or whether this is capital plus operating budget. Particular mention is made of major national research facilities such as the Alan Turing Institute, the Polar Research Ship and the Square Kilometre Array; support of University Enterprise Zones to aid deployment of new technologies, as of emphasis on the Eight Great Technologies[10] (including energy storage); and the creation of further catapult centres.
  • A commitment to support the UK’s world leading research following the Nurse Review, but no detail is given (pg 35). This section also makes an interesting statement about encouragement for online education, which might be a reference to the kind of online materials successfully developed by MIT among others.

One very concrete piece of information is the appointment of Amber Rudd as the new Secretary of State for Energy and Climate Change. She is strongly committed to the government’s stated agenda of carbon reduction, for instance through her comments in an interview[11] with “Business Green” last year. The title of the interview is “I’m a Thatcherite when it comes to climate change”, and a key point within it is Margaret Thatcher’s 1989 speech[12] to the UN General Assembly in which she warned of the dangers of greenhouse gas emissions – a speech which will be a surprise to many readers more than 25 years on, given the way that the (often climate change sceptic) right wing of the Conservative party commonly looks to Thatcher as a guiding light. In a post-election Twitter exchange[13] with Greenpeace’s Energy Desk, she further states that tackling climate change is important to the Conservative party “because of the devastating impact it could have nationally and internationally, unless we take action and do what we can”, and that “David Cameron has personally committed to pushing for a global deal to limit warming to two degrees + has reiterated support for UK Climate Act. He is respected internationally as a leader on climate change issues.”

In summary, the manifesto is insufficiently detailed to make precise predictions as to how energy policy will develop over the next few years. The emphasis is very much on affordability and security of energy supplies rather than on the environment, and where the environment is mentioned this is typically in the context of meeting environmental commitments economically. Nevertheless, both the Prime Minister and the Secretary of State for Energy and Climate Change have given very strong personal commitments to meeting carbon reduction targets. Thus only time will tell whether the new government will indeed be strongly committed to its environmental agenda, and the manifesto was carefully balancing this intent with a message which would appeal to the party’s likely voters – or whether this reluctance to emphasise environmental motivations will be reflected in the government’s actions, and the emphasis in practice will be much more on affordability and security of supply.


[2] Available for download from https://www.conservatives.com/manifesto

[6] For a stimulating discussion of the potential synergies between energy security and environmental benefits see the book “Carbonomics: How to Fix the Climate and Charge It to OPEC” by the leading American energy economist Steven Stoft., available for free download at http://stoft.zfacts.com/wp-content/uploads/2008-11_Stoft_Carbonomics.pdf.