Huhne’s white paper – it’s common sense

Opinion by Energy Voice

THERE have been other matters jostling for the headlines these past few weeks, so perhaps it’s no surprise that the coalition government’s plans for energy market reform attracted so little attention.

After all, nothing is going to change very soon. Nobody is going to resign. Prices will not stop going up.

And since it is a white paper that was published by Chris Huhne, the next stage is not implementation but merely further consultation before anything actually happens.

Neither does the timeframe cry out for a sense of urgency, even if it should. The drive for reform stems from the fact that 25% of UK generating capacity is due to shut down over the next 10 years and, to busy newsdesks, that will seem like a fair comfort gap before there is a real story.

I see it from a different perspective.

A decade ago, we were having much the same debate, only then the challenge was 20 years away, not a decade.

It is remarkable how quickly that first decade has flown, in this respect as in many others. And the uncomfortable truth is that not nearly enough has happened.

Renewables have not made the progress which was assumed of them.

Carbon capture and storage is still in its infancy.

Outwith Scotland, there has been mass political conversion in favour of nuclear’s continuing role – including Mr Huhne’s admirable volte-face – but progress from words to deeds will be slow.

So now, in the blink of an eye, we are talking about 10 years and not 20 before we actually encounter the prospect of losing 25% of generating capacity.

And within that relatively modest timescale, the white paper suggests, £110billion is needed in new investment to build the equivalent of 20 new, large power stations and upgrade the grid.

That is a tall order but it is made much more challenging by the fact that we do not have a command economy.

That does not imply an aspiration but is merely a recognition of fact. Markets deliver many good outcomes but, left to their own devices, they will certainly not deliver the power mix that Britain, with increasing urgency, requires.

And that’s the dilemma that the white paper addresses. Without reform, by 2030 the electricity sector would have an emissions intensity more than three times the level recommended by the climate change committee a few years back.

That is a prognosis that no government can countenance.

This white paper does not seek to shirk that challenge or suggest there are elixirs available, such as massive reliance on imported gas, to generate our electricity. Nonetheless, generation from gas remains the quick and easy fix. So it is also necessary to keep its growth in check to ensure it doesn’t pre-empt the low carbon options.

When the complexities of these competing forces are reviewed, you may well conclude that this is a mission doomed to failure. Markets are powerful commercial creatures and it is an incredibly difficult trick for government to proclaim faith in private sector decision-making and, at the same time, bend the outcomes to satisfy political objectives.

I have no criticism to make of the coalition for making the effort, or indeed for the substance of what they are proposing. Keeping the lights on at affordable cost is not, by and large, a party political issue – unless, of course, the lights go off and those not in power at the time suddenly become the font of all retrospective wisdom.

Indeed, I would go further and praise the white paper for the radicalism of its interventionist intent. We have been afflicted for too long by the pretence that the market will deliver cheap electricity while also meeting our other responsibilities. The white paper ignores that fiction. If carried through, this is interventionism with a capital I – and no less will suffice. For unless the preferred forms of generation can guarantee returns through a series of devices, including a carbon price floor and copper-bottomed long-term contracts, the required investment is not going to take place.

So these plans are about giving the investors the guarantees they need to put their money in to fund the huge capital involved in nuclear and renewables.

What’s more, a “new organisation or organisations” will be created to oversee the process and to manipulate the incentives regime as required in order to produce the desired outcomes.

The bonfire of the quangoes has been delayed due to an outbreak of realism.

There have been predictable complaints in that extending low-carbon incentives to nuclear will draw investment away from renewables, which will probably happen to some extent. But the first responsibility of government is to maintain security of supply, which is not going to be done by renewables alone in Scotland, the wider UK or anywhere else.

The place in the mix of CCS is also fully recognised with a stick as well as a carrot.

The enforcement of emissions performance standards will mean that the days of fossil-fuel power stations which do not meet stiff environmental criteria are numbered, opening the door to CCS as the only acceptable technology.

This white paper deserves constructive debate but also a general political consensus in support.

Having the same debate in another 10 years from now is not an option. By that time, the lights would be going out. And that would certainly put energy policy on the front pages.

o Closely connected to the industry, Brian Wilson is a former UK energy minister