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The devil is still in the detail where policy is concerned

27 April 2010

AECB, the sustainable building association, warns that some of the proposals on carbon policy from the Department of Energy and Climate Change (currently out for consultation) might have the opposite effect to that intended. The group says the Renewable Heat Incentive could encourage people to switch to electric-sourced heating, but half of all power comes from fossil fuels, which could mean people switching from highly efficient gas boilers for less efficient fossil fuel electricity.
It illustrates once again how easy it is for even long-discussed plans to have unintended consequences. However, there are flaws with the government's whole low-carbon policy that make it more likely that the results of initiatives will be both unintended and unwelcome.
First, there is wishful thinking. I have heard it said many times that we should switch to electricity for heating, transport and pretty much everything else, in order to take advantage of low-carbon generation, and it's an idea that's gaining traction. This is all well and good - except that our electricity generation is emphatically not low-carbon yet.
Focusing on low-carbon electricity means we are betting the farm on meeting hugely ambitious targets to transform our energy generating industry. Clearly, the government believes this is possible. But is it probable? The government had better be proved right. It will be very hard to reverse the current drive to electrify everything.
There must be a few less optimistic people around, because there is support for proposals that would bring more people on to the gas network. This is a hugely worthwhile initiative, but a waste of money if we are to have access to low-carbon electricity for all our needs.
A second problem is that policy addresses one issue when in reality it is trying to influence another. The government has run into trouble over this with its energy subsidies, trying to increase energy efficiency or the use of renewable generation when it really wants to cut carbon emissions. Or vice versa - subsidising non-fossil fuels, when the real target is support for renewables. The aims may be allied, but they are not identical.
The third policy danger is missing the boat, as evidenced by the Conservative Party's suggestion that for some projects it might swap the much-maligned Renewables Obligation for a feed-in tariff.
The Renewables Obligation is an ugly baby, certainly. Nevertheless, we don't want to throw the baby out with the bath water. There was a time when half the energy industry argued, strongly, for a feed-in tariff, but that was long ago when the policy was new. Most investors have learned to rub along with the obligation and manage its inherent uncertainties.
Now, when we have huge renewables targets and a difficult investment climate, is not the time to introduce new uncertainties over the Renewables Obligation's entire future - and if the obligation model has failed, over the nascent Renewable Heat Incentive too.
Clarity and stability over the long term are the basic requirements for any regime of subsidies to support low-carbon generation. If the government is clear-headed and realistic about precisely what it wants to achieve, it is much more likely to identify the right tools to do it.
Source: Disconnector

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