New Thinking Blog: Energy Oversight Needed

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on Jan 8, 13 • posted by

New Thinking Blog: Energy Oversight Needed

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Prof. Catherine Mitchell, IGov Team - 8th January 2013.

The Energy Bill has finally been published and will now go through a scrutiny process. We can hope that various changes will be incorporated. Unless changes are made, we the British public wil be stuck with an Act which does not fundamentally reform the electricity market as it set out to do.

Its critics argue that its central component of getting nuclear power off the ground is unlikely to be successful beyond 1-3 power plants – too few to make a dent in the carbon emission reduction and low carbon generation requirements of the UK. Along with this indeterminate number of nuclear power plants, the practical outcome will be more natural gas plants and an undermining of the confidence of the renewable energy industry – one of the two sectors which is going to have take up the low carbon supply slack. The other important sector  –the demand side – only gets a nod despite it being where energy policy should be focused.  In effect, the turmoil of the last two years has thrown the industry up in the air and seen it land more or less in the same place except with new rules of payment for low carbon generation which will create more fuel poor and further barriers to the transition to a sustainable energy system.

How is it that we in Britain have managed to so spectacularly mess up this our third attempt of regulation since 1990. There is almost no stakeholder group which comes out of an analysis of the process  well whether it be government; business; academic; or the lobbies  whether for consumers, the environment, a technology, the regulator; or incumbants. There is something structurally lacking in Britain when it comes to making long term decisions for the good of society.

Climate change is one of the key issues facing humanity.  Ninety five % of British climate change emissions derives from energy in some form, whether electricity, the way we heat our homes or the fuel we use to drive our cars.  In parallel, the world is getting a much more complex place in terms of countries  using and producing energy. The new emerging economies such as, but not limited to, China and India are using more energy (in part to produce goods we buy) and they are signing up to long term reciprocal arrangements with many new producing countries to ensure continued access to energy. Getting our energy policy right so that we meet the quadruple challenges of climate change, energy security, affordable prices and time (meaning at a rate that makes a difference) should be one of the central issues facing our ‘leaders’.

Yet what do we get?  Two years of wrangling between political parties and within the coalition ending up with an Energy Bill which reflects the lowest common denominator agreements dredged up out of  the multiple political tensions. DECC has been trying (if not very well) to transform the UK’s ‘dirty’ energy system into a sustainable, smart one that meets its legally binding environmental targets, as well as laying the building blocks for a 21st century UK economy. The Treasury has argued, presumably on the back of one or two ‘outlier’ economic assessments, that the cheapest way to cut emissions is by moving from coal to gas –not a medium or long term cost-effective solution to climate change. Despite a reality check (eventually) on the costs and needs of supporting nuclear power; falling global renewable energy costs amidst rising investment in RE; changes to e global gas market as a result of shale gas; numerous new oil and gas finds; and  a unique oppositional stance across the energy industry spectrum to the Energy Bill – the Government pressed on. Throw in the transfer of a clever Energy Minister, Charles Hendry, to be replaced by John Hayes, seemingly chosen for his pro-nuclear position rather than energy policy knowledge and experience; Coalition politics and the popular press; the PM wading in about tariffs and you have combishambles: an example of decision-making and political leadership which Britain should be ashamed of.

All those interested in energy in its broadest sense, and democracy and political leadership in a general sense, should take note of, and learn from, this process. My prediction is this: the Energy Bill will go through, albeit with several changes; even with those changes, almost immediately it will become clear that it is pretty much supporting an energy system like we currently have and that it will not lead to the change it was meant to make; it will take 3- 5 years before whatever next Government is in power admits that we do not have an energy system fit for purpose and what we need is an Energy (not electricity) Market Reform. Bearing in mind that pressure was building up over the last 5 years for some sort of reform before EMR got going, Britain will have lost 10 years when it could have been modernising its energy system. Some large companies and shareholders will have done very well but society will have lost.

Energy is political. The choice of different technology pathways to a sustainable future will have major implications for consumers and those technologies involved. Because of this, the responsibility for energy policy needs to be kept with politicians. However, there needs to be oversight of the decision-making. Currently, the National Audit Office is able to comment on the value or otherwise of different  Acts, if asked to. The Select Committees are able to scrutinise energy policy.  However, there is no continuous oversight which would allow the British public to understand how energy decisions are made and what information those decisions are based on.

There are various options. One soft form is to set up some sort of energy advisory panel, of the sort which was shut down in 2003. The panel could meet monthly for a day and be made up of 14 or so people plus the senior civil servants from across Government who deal with energy. Their terms of reference could be to advise on Government energy policy and have the power to to ask for any information about energy across Government, albeit confidentially. This advice would feed into Government policy and, through more transparency, keep the various fact free, self-interested vested interests (and this includes political parties and ministers as much as companies) at least a bit more in control and to get the different departments (civil servants, special advisors etc) to talk regularly to each other. Nothing like this exists in Britain and as a result Ministers and Ministries can more or less do what they want, using consultants and academics who basically provide a study saying what it is that they want to hear.

A tougher alternative is that there is a legislated Office for Climate Responsibility. This would be a parallel body to the Committee on Climate Change. The CCC would continue to be responsible for science, including carbon budget advice. The OCR could provide an annual statement every year saying whether the policies in place are sufficient to meet the budget targets. This nicely separates the body which sets the targets from responsibility to meeting them – a necessary requirement as climate science demands greater emission reductions over shorter periods of time.

The last few years of energy policy-making in Britain show how hard it is for Britain to make strategic,  long term decisions for the good of society rather than short term decisions for the good of a private company.

Global challenges increasingly demand long term, consensual strategies both internally to Britain and externally.  We in Britain need to have ‘leaders’ who take their responsibilities to society seriously enough to construct, and act upon,  a new British way of thinking about the future.

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