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The Economics of Clean Energy

Winding the clock back to the start of parliament in 2010, I’m sure we all remember David Cameron promising to deliver ‘the greenest government ever’, with rhetoric about taking the necessary hard decisions to ensure we are equipped for a prosperous and low-carbon future.

24th September 2015    |     Peter Rolton: Chairman, Rolton Group

Since the Conservative re-election in May, however, we have seen a roll-back of gigantic proportions on all things renewable; rather than stepping up to our long-term environmental responsibilities, the emphasis now seems to be solely on short-term financial gain by slashing support and removing the very policies intended to curb our national emission levels.

With subsidies for clean technology being cut as targets are approached, it has become evident that the government is not participating in the transition to a low-carbon economy out of a sense of what’s right, but because we are legally bound to make changes. This attitude of doing the very least that we can get away with is, frankly, embarrassing for a nation that until very recently was seen a global leader in renewable energy deployment.

It is not just a sense of moral duty that drives the green energy sector, either; what the government appears to have totally lost sight of are the huge economic benefits of a vibrant renewables industry. This was made all the more plain by John Cridland, Director General of the CBI, who during a speech at Tuesday’s climate leadership conference in London pointed out that the UK’s green economy is worth around £120bn a year, and that “between 2010 and 2013, the green economy grew at more than 7% a year, compared to less than 2% a year over the same period for the UK economy as a whole.” It is therefore completely mystifying that we should be continuing down this path of “death by a thousand cuts” for the renewable industry, as so aptly put by Ben Warren, Energy Corporate Finance Leader at Ernst & Young. Cridland’s full speech is well worth a read, and can be found online here.

Joining the CBI’s Director General on stage at the conference was former vice-president Al Gore, who took the opportunity to question Britain’s “puzzling” new stance on renewable energy. Gore is well-known around the world not only for his political career but also for his acclaimed documentary ‘An Inconvenient Truth’, which attempts to demonstrate the devastating implications of climate change in terms that everyone can understand. What interesting timing, then, it was for DECC to publish a press release on Wednesday morning that appropriates his title whilst rallying against its core message! This overt piece of propaganda is entitled ‘Shale gas – an inconvenient truth for the anti-fracking lobby’, and stacks renewables firmly against economic sense, suggesting that fracking is the tonic for all of our energy related ailments and anyone who takes issues with its widespread implementation is an idealist at best and delusional at worst. The full release can be read here.

Conversely, there are now worldwide initiatives emerging that hope to combat issues around cost-effective renewable implementation, such as the Global Apollo Programme, which is backed by esteemed scientists and public figures including David Attenborough and Dr Brian Cox. This provides exactly the sort of aspirational strategy we need to get behind to drive the clean power movement, and will surely leave fracking in the dust if successful.

Here’s why: fracking will always be expensive, it will never be totally without risk, and at some point it will run out. Renewable technologies, on the other hand, edge closer to economic parity all of the time and at some point in the future will be much more affordable than fossil fuels. This comes down to a basic economic principle, namely that mass production leads to greater efficiency, more opportunity for innovation, and lower base level cost. Without continued financial support in their infant stages, though, it will take far longer for sustainable technologies to gather enough momentum to become self-sustaining and the UK will slip even further behind its neighbours in the inevitable move to a low-carbon economy. There is no doubt that we will require a mixture of many energy sources to carry Britain through the coming decades, but to keep cutting the clean industry off at its knees every time it comes close to competing with fossil fuels is to severely hamper our progress and will ultimately cost us dearly.

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