UK-Iceland agreement and new report could herald a geothermal energy revolution

The map shows the locations of geological hotspots that could be tapped for energy throughout the UK. The Eden Project's Tim Smit is behind the idea.

As Britain signs an agreement with Iceland to cooperate on geothermal power and offshore drilling, a new report says hot rocks could power one fifth of UK homes.

The bilateral agreement follows talks last month between Energy Minister Charles Hendry and Icelandic power sector leaders. The MoU, which Mr. Hendry signed with his Icelandic counterpart Oddný G. Harðardóttir yesterday, will strengthen the two countries’ relationship on energy issues such as interconnectors and the development of their oil and gas industries, including offshore drilling.

Charles Hendry said: “Today’s agreement will help pave the way for a closer relationship with Iceland, which I hope can yield significant benefits for the UK, including the development of geothermal power, greater use of interconnectors to transport energy under the sea, and developing oil and gas resources."

The two countries have pledged to exchange information on the development of the deep geothermal sector in the UK, including the supply of heat to district heating networks.

They will also explore the possibility of developing electricity interconnection between Iceland and the UK, and their respective Ministries for International Development will collaborate on developing renewable energy projects in developing countries with a special focus on East Africa.

Geothermal could power one fifth of homes

The new report on the UK potential for geothermal energy, by Sinclair Knight Merz and commissioned by the Renewable Energy Association, concludes that it should be possible for geothermal energy to provide the UK with a cumulative benefit of 5,000 gigawatt-hours (GWh) of electricity and 32,000 GWh of heat by 2030. This is power equivalent to nine nuclear reactors.

Deep geothermal systems generate electricity from water heated by rock deep underground to create steam that drives conventional turbines.

The report’s author, Mr Tim Jackson, a Senior Geothermal Engineer at SKM explained that “SKM has used internationally recognised methods to assess the most promising resources and concluded that there is potential for 9,500MW of electrical power and 100,000MW of heat for projects with a 25 year lifetime.”

Mr Jackson continued, “SKM’s analysis suggests that a feed-in tariff level of approximately £300/MWh for electrical generation and combined heat and power projects is required to develop these geothermal projects in the UK. This is approximately equal to five Renewable Obligation Certificates (ROCs) per MWh.”

“For heat-only projects a Renewable Heat Incentive of £30 to £70/MWh is needed.”

“The UK already has world-leading drilling skills and these could be applied to support geothermal projects and develop new techniques to make Engineered Geothermal System power plants more commercially attractive,” he added. “With the right skills and supporting mechanisms in place, the resulting energy production could make a significant contribution towards achieving the UK’s sustainable energy needs as well as enhancing the UK’s capabilities in sustainable energy.”

A geothermal project in Newcastle led by Paul Younger has been drilling for several months and is about to reach a point at which it can tap into hot rocks at 200°C, which will be used for a district heat main.

Key findings of the report include:

• The resource is widely spread around the UK with ‘hotspots’ in Cornwall, Weardale, Lake District, East Yorkshire, Lincolnshire, Cheshire, Worcester, Dorset, Hampshire, Northern Ireland and Scotland


• Cost reduction potential is exceptionally high


• Deep geothermal resources could provide 9.5GW of baseload renewable electricity – equivalent to nearly nine nuclear power stations – which could generate 20% of the UK’s current annual electricity consumption


• Deep geothermal resources could provide over 100GW of heat, which could supply sufficient heat to meet the space heating demand in the UK


• Despite this significant potential, the UK support regime is uncompetitive with other European countries.

The geothermal industry is waiting for the results of the Renewable Obligation Binding Review, and lobbying for support to be higher than two ROCs, which it says will be too low to support domestic investment. This is because it is a new technology in its development phase, like the marine energy industry.

Dr Ryan Law, Chair of the REA Deep Geothermal Group said: “We don’t want to be left out of a global industry which is estimated to be worth £30 billion by 2020. We could be at the forefront of this industry given the strength of British engineering skills.” The industry has synergies with the oil, coal and gas industry on account of its need for expertise in geology and drilling.

Tim Smit, the man behind the Eden Project, is planning to build a geothermal heat and power station at the Eden Project, and says in a foreword to the report: “it is the platform for the birth of a new industry; for a small investment today we could be creating something that our grandchildren will thank us for.”

The report recommends that projects could be developed close to areas of large heat demand, such as hospitals or municipal buildings.

Support for geothermal power would cost an estimated £11 million a year, which is the equivalent of adding less than 50p to the average household electricity bill.

Where are the resources?

Suitable geology is not found throughout the UK, but only in particular places. The resources and their locations identified for the report are illustrated in the map above and have been summarised by Cluff Geothermal as:

Cornwall and the South West

HEAT: 13,000 MWth - 6.5 million homes annual heat demand

POWER: 4,000 MWe (equivalent to 3.3 nuclear power plants)

The North East

HEAT: 9,000 MWth - 4.5 million homes annual heat demand

POWER: 4,000 MWe (equivalent to 3.3 nuclear power plants)

The Lake District

HEAT: 8,000 MWth - 4 million homes

POWER: 2,300 MWe (equivalent to 1.9 nuclear power plants)

Wessex Basin

HEAT: 33,000 MWth - 16.5 million homes

Cheshire Basin

HEAT: 14,000 MWth - 7 million homes

East of England

HEAT: 12,000 MWth - 6 million homes

Worcester Basin

HEAT: 6,700 MWth - 3.35 million homes

Larne Basin

HEAT: 1,000 MWth - 500,000 homes.

_{Story: David Thorpe, News Editor}

European emissions rose in 2010, with UK second largest emitter

European greenhouse gas emissions increased by 2.4% in 2010, or 111 million tonnes of CO2-equivalent, due to a cold winter and the economic recovery following the 2009 recession in many countries.

About 56% of the EU increase in GHG emissions was accounted for by Germany, the United Kingdom and Poland, with a growth in hydrofluorocarbon emissions becoming a worrying factor.

The figures were supplied by the European Environment Agency today and cover all greenhouse gas emissions of the 27 member states of the European Union. They corroborate the figures released last week from the latest figures from the International Energy Agency, revealing that global greenhouse gas emissions reached a record high of 31.6 gigatonnes last year, an increase of 1Gt, or 3.2%, on 2010.

EEA Executive Director Jacqueline McGlade said that “the increase could have been even higher without the fast expansion of renewable energy generation in the EU.” The report itself also attributes the reduced increase to “the improved carbon intensity of fossil fuels, underpinned by strong gas consumption".

Nevertheless, final energy demand increased by 3.7% in 2010, outpacing the increase in economic output (2.0%).

In the previous year there was a sharp 7.3% decrease due to the recession. Combined with this, the EU is still fully on track to meet its Kyoto target. The long-term trend of reduction is continuing, with emissions to 15.4% below levels in 1990. However, the emissions from the 15 member states with a common commitment under the Kyodo Protocol in 2010 were just 11% below 1990 emissions.

“This rebound effect was expected as most of Europe came out of recession,” said McGlade. Economic growth was positive in the EU as a whole in that year, with GDP increasing by about 2% compared to 2009.

The worst performers

The overall EU GHG emission trend is dominated by the EU-15 (mainly by Germany, the United Kingdom, Italy, France and Spain) accounting for 80.4% of total EU-27 GHG emissions.

Germany has the highest emissions of all European countries, at 1246.1 million tonnes, followed by the United Kingdom with 763.9 million tonnes, France (559), Italy (519.2) and Poland (457.4). Of the new Member States, Poland contributes most to the total EU-27 GHG emissions, namely 8.5%, followed by the Czech Republic and Romania (2.9% and 2.6%, respectively).

Between 2009 and 2010 the UK increased its emissions by 3.1% and Germany by 2.7%. The worst performers were Estonia (a 25.2% increase), Finland (up 12.8%), Sweden (up 11%) and Latvia (up 10.2%). In line with their poor economic performance, continued emission reductions were experienced in Greece and Portugal (both -5.1%), Spain (-2.8%), Cyprus (-2.4%) and Romania (-1.6%).

The industrial sectors covered by the EU Emissions Trading System (EU ETS) increased their emissions more in 2010 than those outside the EU ETS. They increased by 2.5%, with emissions from industrial sectors rising by 5.2%. However, this increase was lower than the growth in industrial gross value added that year, showing a slight reduction in carbon intensity.

In terms of overall performance since the base year of 1990, the United Kingdom and Germany are in the median position of European countries with a reduction of 24%. Spain is the worst performer over this period with an increase of 22.8% on the base year, followed by Portugal (up 17.4%), Greece (up 10.6%), Ireland (up 10.3%) and Austria (up 7%).

The top overall performers are in Eastern Europe: Lithuania (a reduction of 57.9%), Romania (down 56.4%), Bulgaria (down 53.7%), Latvia (down 53.4%) and Estonia (down 51.9%). Even coal-reliant Poland has managed a reduction of 28.9% on its base year.

The main reason for emission reductions in Germany is increasing efficiency in power and heating plants, but in the UK it is mostly due to the liberalisation of energy markets and the subsequent fuels switches from oil and coal to gas, plus nitrogen dioxide emission reduction measures in the production of adipic acid, widely used in the manufacture of nylon and polyurethane.

The household and services sectors accounted for the highest increases in emissions, increasing by 43 million tonnes of carbon dioxide-equivalent compared to 2009, mostly attributable to the colder winter in 2010.

HFC emissions up

A worrying trend is that hydrofluorocarbon (HFC) emissions are increasing at a faster rate than carbon emissions now, and becoming more significant as a result. Each HFC molecule does 11,700 times more damage as a greenhouse gas than a carbon dioxide one over a 100 year period.

There was an increase in their emission in 2010 of 4.4 million tonnes or 6.6%, stemming from these gases' use in refrigeration and air conditioning. Finland, Italy, Spain and the United Kingdom are responsible for the largest increases in absolute terms. The UK's emission of HFCs is 125% up on 1990 levels.

All the figures are based on data submitted by member states and then checked by the European Commission and the EEA. They cover information up to 28 March 2011. All parties to the Kyoto Protocol also have to provide information on how they are implementing their greenhouse gas commitments to minimise impact on developing countries. This information is presented in the full report.

£10 million for renewable heating for social housing tenants

Social housing landlords can now apply for grants of up to £175,000 to install solar hot water panels, heat pumps and biomass boilers into the homes of their tenants.

It follows the launch of a second round of the Renewable Heat Premium Payment (RHPP) scheme by the Department of Energy and Climate Change (DECC), with a total budget of £10 million.

It is expected that around 60 projects will win funding across England, Scotland, and Wales. Good news as it is, the budget will only benefit about 5,000 individuals, however, just 0.1% of the 3.9 million who live in social housing. The vast majority of these households live in fuel poverty and would welcome this type of help.

A further scheme targeted at communities who want to develop district renewable heating schemes will be launched later in the summer; interested participants can register for details here for when the announcement is made.

The closing date for applications for this round is July 4 and it is running on a first-come first-served basis; once the budget for the scheme is reached then applications will no longer be considered.

Eligible technologies include biomass boilers, solar thermal panels, ground source heat pumps, air-to-water heat pumps and water-to-water heat pumps.

“Last year our low carbon heating scheme for social landlords helped nearly 1000 householders stay warm and reap the benefits of clean, green heat,” said Energy and Climate Change Minister Greg Barker. “This year we have increased the cash available, which will help even more people move away from expensive old heating systems to low carbon, more sustainable alternatives.”

In the opening round last year, 37 social housing providers received a total of nearly £4.4 million. Only two of these were in Scotland and three in Wales. The rest were in England. One social landlord, New Linx Housing Trust, even received two grants. Just eleven received the total amount possible of £175,000.

Air source heat pumps were the most popular technology, probably because they are easiest to install. They represented 35% of installations, with solar water heating systems coming second at 33%. 19% of installations were ground source heat pumps and just 13% biomass boilers.

However, there are question marks over the efficiency of air source heat pumps compared to other forms of renewable heat.  In some circumstances they can cost more and emit more carbon than the form of heating that they may replace.

The scheme was welcomed by Philip Sellwood, Chief Executive of the Energy Saving Trust, which manages it and will evaluate the bids for funding. He said that it “offers real value to tenants as not only does it help them save money on their energy bills, but also helps them to reduce their energy usage”.

Criteria for funding include value for money, the type of fuel being replaced (with high carbon polluting fuel favoured), the presence of loft insulation to 250mm and cavity wall insulation (where practical), and the organisation's track record on delivering similar projects.

Those who have recently removed a mains gas heating system or currently heat their home with mains gas are only eligible to apply for solar thermal.

The amount of funding depends on the type of technology to be implemented:

Technology	Voucher Value
Solar Thermal Hot Water	£300
Air-to-Water Heat Pump	£850
Ground-Source or Water-Source Heat Pump	£1250
Biomass boiler	£950

Vincent Wedlock-Ward, Project Officer at Southern Housing Group (Isle of Wight Region), a previous social landlord competition winner, said that they received £175,000 from DECC under last year’s RHPP scheme. "This helped us replace old overnight storage heating systems with air source heat pumps for 40 householders living off the gas grid. Without this funding, this would not have been possible".

She reported that residents with the air source heat pumps fitted have found that their bills have been cut by half.

A programme of seminars is touring the country to explain what the scheme entails to local authorities and housing associations.

There is also an advice line on 0800 512 012 for more information. Winners will know whether they have been successful in early August.

We're heading for 6 degrees rise says IEA. Here's a way to stop it.

I've got good news and bad news. Which would you like first?

OK, here's the bad news, and it's really bad. According to the latest figures from the International Energy Agency, greenhouse gas emissions reached a record high last year of 31.6 gigatonnes, an increase of 1Gt, or 3.2%, on 2010.

IEA’s energy pathway, that seeks to limit the average global temperature increase to a still-risky 2°C, requires CO2 emissions to peak at 32.6 Gt no later than 2017, i.e. just 1.0 Gt above 2011 levels.

Clearly this is no longer possible.

"When I look at this data, the trend is perfectly in line with a temperature increase of 6 degrees Celsius (by 2050), which would have devastating consequences for the planet," Fatih Birol, IEA's chief economist, commented.

This constitutes nothing short of a global emergency. Panic stations. Hit the red button. Call International Rescue. Something must urgently be done, right?

Yet negotiators from over 180 nations, meeting in Bonn last week to try to get a new legally binding global climate pact signed by 2015, failed abysmally in their efforts. Tragically, reports coming out suggest that they became bogged down in procedural wrangling and got lost on the road to nowhere. Any deal reached ideally needs to be ratified at the annual climate talks in Qatar in December.

That’s all bad enough. But then there's the economic paralysis gripping Europe that is stifling both investment confidence and the setting of ambitious climate-protecting legislation.

So in the face of this perfect storm, how could there possibly be any good news?

What we need is money. Lots of it. And we need the conditions necessary for it to be invested in low carbon infrastructure. Everywhere.

We are told there isn't any. But there is.

In 2009, the most recent year for which figures are available, $16.8 trillion in total was held in pension fund assets around the world, according to the OECD.

$1.589 trillion of capital is held in UK pension funds alone (just over 10% of that total), with $9.58 million held by US pension funds.

What is more, $399.6 billion is also written in insurance premiums in the UK.

Let's confine our considerations of the potential of this pot of money to the UK, although clearly a bigger sum could be unlocked on a global level.

In 2008, the rate of return on pension fund investments in the UK was negative, by a large amount, reflecting falls in the stock market. The figure represented a drop in value of around 14%. I don't have corresponding figures for the insurance industry, but I would imagine they are not too different.

Both industries are known to be conservative with their investments. Mostly, they don't invest in low carbon and environmental infrastructure. But last week's official figures show that this is one sector of the economy that is actually defying the recession and the growing, not just in the UK, but globally.

Wouldn't it make sense for these industries to invest in this sector?

Faced with a stagnant economy, all governments seem to be able to think of doing in a vain attempt to stimulate it, is to inject more cash into it. But, according to Charles Cowling, managing director of JLT Pension Capital Strategies, this is exactly the wrong thing to do, because it forces up costs (by forcing up liability values) for the very funds that could be invested in infrastructure.

Joanne Segars, Chief Executive of the National Association of Pension Funds (NAPF), protested against the prospect of another round of quantitative easing only last week.

Furthermore, the UK's pension system is threatened with having its tax income drained by ballooning retirement costs as we all get older.

Actually, this should provide it with a further incentive to obtain a higher rate of return from its investments. But investment conditions are not yet right. And, surprisingly, nor are the attitudes of the fund managers.

According to Christopher Greenwald, head of sustainability application and operations at Swiss-based Sustainable Asset Management (SAM), which provides the data for the Dow Jones Sustainability Indexes, while companies are taking on board the sustainability agenda, investors are lagging 15 to 20 years behind.

They do not yet fully understand the impact of sustainability on their business performance and financial returns, and this is why they are experiencing losses from their investments. "Investors are about where companies were in 1995 when sustainability reporting was just getting off the ground," he says.

Clearly, they need some training in the importance of sustainability issues in evaluating company performance.

At the moment, just 1% of pension funds' assets around the world are invested in infrastructure. Regulation is one of the major drivers of pension funds investment strategies.

So what is the Treasury doing to improve the confidence of fund managers that any money they might put into investing in infrastructure in the UK will have a good ROI, and will not fall into a black hole due to the usual British disease of cost overruns and missed schedules?

Last November, the National Association of Pension Funds signed a memorandum of understanding with the Treasury to support the establishment of a new Pension Infrastructure Platform owned by pension funds, to bring as much as £2bn of investment by early 2013. Its representatives have been meeting regularly with officials in the Treasury ever since.

£2bn is not much nowadays, but it's a good start. If just 2% of that $1.5 trillion or £1 trillion in assets were invested in infrastructure, that would represent £200 billion, or the amount required for investment in low carbon infrastructure up to 2020. No one is suggesting that all of this money should be invested in low carbon infrastructure. And we haven't even considered investment companies' assets.

This gives an indication of the opportunity that the Chancellor and the Treasury has, to create the right conditions for these companies to feel confident to invest in this area.

At the moment, the cost of government debt is so low, because George Osborne wanted to lock in current low borrowing costs by issuing perpetual bonds, that there is scant reason for fund managers to be interested in the potentially much more costly mechanism to fund infrastructure projects.

But the NAPF says it is working with a core of 10-12 pension funds and the Pension Protection Fund on the details of the Pension Infrastructure Platform. “The Platform, which will be owned by pension funds for pension funds, will seek to invest in a wide range of infrastructure assets," said Joanne Segars. "It aims to raise £2 billion which could be leveraged up to £4 billion of new money for investment in infrastructure and be open for business in early 2013.”

I hope this happens. It should be just the start. There is precious little light in the gloom, but this is some of it. Let's not let this chance pass us by.

Goldman Sachs, while being investment bankers rather than pension funds, are leading the way with a $40 billion clean energy investment plan announced last week. They clearly see a good bet. Let others follow.

Oh yes, and someone should also educate pension fund managers about the advantages of looking at the sustainability performance of companies.

Low carbon and environmental industries defy the recession: official

On the road to success: alternative fuels power the most growth in the UK green economy.

Eat your heart out, George Osborne. The UK's low carbon, environmental goods and services sector grew by 4.7% in the last year, adding £5.4 billion to the economy.

Growth is led in particular by the increasing use of alternative fuels such as biofuels, wind power, building technologies and heat pumps.

This compares to the growth rate for the UK economy as a whole in the same year of 0.7%. The Chancellor had been expecting growth of 2.3% in 2011.

In his Autumn Statement last year he famously described green policies as a "burden" and a "ridiculous cost" to British businesses. He predicted that “businesses will fail, jobs will be lost, and our country will be poorer" as a result of them.

In fact, the exact opposite appears to be the case. In 2010-11 the value of sales in the sector reached a total of £122 billion compared to £116.8 billion in the previous year.

Jobs in the sector are up 2.8% on the previous year to 939,627. The report says “This is the first really positive sign of employment growth in the sector since the recession in 2008".

The figures come in a report from the Department for Business, Innovation and Skills, which also shows that the UK comes an overall sixth in the world in the low carbon and environmental goods and services sector, and sixth in 18 of the 24 sub-sectors identified. It follows the US (at £645bn), China (£435bn), Japan (£205bn), India (£205bn), and Germany (£140bn).

The six sub-sectors where the UK is not sixth are: carbon finance, where it comes second in the world, alternative energy (8th); geothermal (7th), photovoltaic (7th) and wave & tidal (5th).

Growth in the sector in the UK has been consistent in the last few years: £4.8bn or 4.3% in 2008-09 and £4.7bn or 4.3% in 2007-08.

Looking at the number of companies in the sector, this is also increasing, albeit slowly. In the last year it was 51,682, up 0.1% on the previous year, but the year before that there was a drop of -1.2% and no growth the year before that, at the start of the recession. However, these companies are employing more people.

Looking more closely at the sub-sectors, the largest growth is found in alternative fuels (15%), building technologies (12%), wind (11%), alternative fuel vehicles (11%) and heat pumps (9%) (mistakenly called geothermal in the report).

The highest year-on-year increase in growth rate is for carbon finance, followed by wind, wave & tidal, carbon capture & storage and photovoltaic.

Export of UK expertise in this area is becoming increasingly valuable. At £11.8 billion and up 3.9% on the previous year, this represents 2.5% of the value of Britain's exports for that year. 58% or £6.9 billion of this total is accounted for by alternative fuels, building technologies, photovoltaic, wind and water/ waste water.

Globally, sales in 2010-11 were £3.3 trillion, an annual increase of 3.7%. Of this, low carbon sales formed 48% of the total at £1.6 trillion, compared with renewable energy at 31% or £1 trillion, and environmental goods and services at 21% or £0.7 trillion.

The countries with the fastest growth in this sector are predominantly from the developing world: the Philippines (39%), Ukraine (16%), Pakistan (15%), the Czech Republic (13%), Saudi Arabia (13%), Turkey (13%) and Brazil (12%), mostly because they are starting from a lower base.

The report says that growth projections in the sector as a whole demonstrate a steady and sustainable trajectory, with annual forecasts increasing from 3.9% to 4%. Renewable energy shows the highest level of growth at 4.5%, with environmental services lowest at 3.4%.

The sub-sectors that are forecast to have the highest global growth rates for the current year are predicted to be carbon finance at 9.2%, additional energy sources at 9.1% and wind power at 5.2%. The lowest growth rates would be for nuclear power at 2.1%.

Energy-intensive industries to get billions in EU-ETS compensation

The European Commission has cleared Member States to pay billions to high electricity using industrial sites, such as steel and aluminium producers, to compensate for EU Emissions Trading Scheme (ETS) costs after 1 January 2013.

The sectors deemed eligible for compensation include producers of aluminium, copper, fertilisers, steel, paper, cotton, chemicals and some plastics.

It will allow the refunding of up to 85% of costs incurred by these sectors from complying with the scheme from 2013 to 2015, falling to 75% by 2019 to 2020. This will amount to billions of euros.

In Britain, George Osborne has already promised £250 million of help for UK companies to compensate them for the carbon price floor in his Autumn Statement last year. Many already perform well in meeting their carbon reduction targets and reducing, thereby, their energy bills.

The Commission reached this decision after lengthy period of consultation with member states and stakeholders. It determined that these industries would not be able to pass on the costs incurred to their customers without suffering from unfair competition from imports that are not subject to the same rules.

EC Vice President Joaquín Almunia said that the rules were being changed to prevent “carbon leakage, in other words the relocation of industrial sites outside the EU" as a result of changes to the emissions trading scheme, and to preserve competition within the internal market.

The EU has an aim of reducing greenhouse gas emissions by 20% by 2020 compared to 1990 levels. Mr. Almunia said that if companies were to relocate their facilities outside the EU then “the objective of reducing overall emissions will not be realised".

“The rules have been designed to protect the effectiveness of the EU ETS in order to promote a cost-effective decarbonisation of the economy," Almunia said, and “to minimise competition distortions in the internal market by avoiding subsidy races within the EU at a time of economic uncertainty and budgetary discipline".

The maximum aid amount that Member States can grant will be calculated according to a formula that takes into account the installation’s baseline production levels or the installation’s baseline electricity consumption levels, together with the CO2 emission factor for local electricity.

This ensures that the aid is proportionate and that it maintains the incentives for electricity efficiency and the transition from "grey" to "green" electricity. For this reason it does not fully compensate industry for the full costs of the EU Allowances.

Carbon capture and storage

Mr. Almunia also announced that the construction of carbon capture and storage plants for coal burning power stations can receive up to 15% cost subsidy without breaking state aid rules. Aid will be highest for those projects which are chosen in a genuinely competitive and transparent bidding process.

Member states are allowed to use the revenues generated from the auction of emission allowances to support the construction of highly efficient power plants, including those that are carbon capture and storage ready. This is mandated for plants over 300 MW of rated capacity.

Support is also available to upgrade dirty power plants; and hospitals are to be excluded from the costs of the EU ETS.

"All in all," he said, "these new rules reflect the general approach to state aid that it is legitimate as long as it supports areas of common interest like climate change, provided that it is necessary, efficient and well designed".

The new Energy Bill is everything the UK doesn't want

The draft Energy Bill, published today, will do nothing to help energy efficiency or make it easier for new renewable energy companies to enter the market place.

It is too complicated, biased towards the Big Six, gas and nuclear, and still contains many uncertainties.

Even the Institute of Directors thinks so. Corin Taylor, its Senior Economic Adviser said:
"Businesses need clean, secure and affordable energy, but we're concerned that the draft Energy Bill may fail to deliver. We need to see a technology-neutral approach adopted as soon as possible, so that the cheapest low-carbon energy sources are prioritised, but the Bill confirms that the Government will try to pick energy winners for at least another decade.

"It looks like an overly-complex way of delivering much-needed investment in Britain's energy infrastructure."

Joss Garman, senior energy campaigner for Greenpeace, slammed the Bill for failing to do anything about energy efficiency, “the fastest and the cheapest way to bring down both bills and emissions, and said it will make it "harder to invest" in renewable energy, particularly for small generators.

“The coalition has decided to throw billions of pounds at the failing nuclear industry, which is going to send household bills even higher," he said, adding that by encouraging greater "dependence on burning expensive imported gas to generate electricity", this "will increase bills for families and businesses and see money going to countries like Qatar and Norway instead of back into the British economy.”

Dr Neil Bentley, CBI Deputy Director-General, said there are still many unknowns. “We are still some way from having a detailed picture of how the electricity market will look in the future," and that it was now up to Parliament to ensure that it "not only gets it right, but does so as a matter of urgency".

“The clock is ticking to create the market certainty that will unlock billions of pounds of private sector investment, generating many new jobs across the UK, and securing an affordable supply of energy," he added.

Which? executive director Richard Lloyd is sceptical and said he "wants to see more evidence and the small print before we can judge whether this will work for all of us who are expected to foot the bill”.

"Contracts for Difference could see potential savings for consumers but the Government must be honest about the cost that this investment will involve," he added, at the same time calling for reform of the retail market and "an effective energy efficiency strategy".

The IPPR also says that a "tax on the emissions of power companies contained in today’s Energy Bill will do nothing to reduce carbon emissions while piling more cost on to the shoulders of already hard-pressed consumers in the UK, and threatens to damage the reputation of policies aimed at tackling climate change". It says it will waste £1 billion and argues for a different approach to raising the carbon price and raising certainty for investors that would see the creation of a European Carbon Bank to manage the price at an EU-level.

The Institution of Engineering & Technology (IET), the non-profit engineering body, also expressed surprise that "no reference is made to reducing demand in the announcement made today".

The chief mechanisms for promoting low carbon generation and keeping the lights on are the feed in tariffs with contracts for difference (FIT CfD) and the creation of a capacity mechanism. But how will they work?

What is FIT CfD?

It is a type of power purchasing agreement between the generator and the purchaser that guarantees a price over a period of time, with a top up, equal to the price difference between the cost of producing the electricity and the current market price.

They are intended to help provide a guaranteed, fixed return on investment to compensate for the high initial cost of constructing low carbon generation plant.

The Bill's impact assessment admits that “only low-carbon projects that are able to secure FIT CfD contracts will be able to participate in the market".

For intermittent generation like wind and solar power, pre-selling a day ahead in the electricity market, a common practice, would give it a low price. You might think this was an advantage for renewables, but it is not if a higher price is required to repay investors.

The Bill allows for FIT CfD contracted plant to receive a top-up price to compensate for this perceived disadvantage. But as the price of constructing new plant comes down, this policy could actually prevent some types of renewable energy from being as competitive as they otherwise would be.

However, it should remove or improve the situation where wind farms are currently paid not to produce electricity, which has been seized on by anti-wind farm protesters as a reason to oppose them.

In a future Britain where a FIT CfD package is implemented, there will be savings in carbon costs as decarbonisation will be more rapid than without the package.

Generation costs would also reduce as there will be reduced output from gas plant and more from coal-with-CCS (carbon capture and storage) plant (coal is cheaper than gas).

This assumes that CCS materialises as an installed technology for coal-fired plant. This is not an inevitable outcome if gas plant becomes relatively cheaper due to the introduction of the much-criticised low Energy Performance Standard (EPS) for generation plant of 450g/kWh being proposed by the Bill, that would let gas plants be constructed without the need for expensive carbon capture and storage.

It's a gamble. The modelling used by DECC argues that by the latter half of the next decade, assuming nuclear power stations come on stream and are in budget, then consumer costs for electricity will be reduced if fossil fuel prices are high. The question is, whether anyone believes this will happen.

If this low carbon generation does not arrive, more fossil fuels will be burnt and the UK will spectacularly fail to meet its carbon emission targets of 50g CO2/kWh in 2030: it will be 190g CO2/kWh.

Under FIT CfD, consumers will be shielded from longer-term wholesale price increases, but, equally, if prices go down their bills will not.

And in the long run, prices from renewable energy installations are bound to reduce as the technologies mature, as Ed Davey admitted in a television interview with Andrew Neil on Sunday, i.e., consumers could end up paying more than they would otherwise.

More damagingly, the impact assessment says, "changes in wholesale prices only affect the amount of support paid out by Government; hence the price risk is borne by Government balance sheets."

If the price to guarantee the building of new nuclear power stations is on the Government balance sheets, then this is the very definition of a public subsidy and will not be permitted by Brussels.

Assuming it does proceed, then overall revenue expectations for generators would be based upon the agreed FiT CfD strike price.

For nuclear power, a ‘strike price’ of over £150 per MWh (assuming a 70% capacity factor), or, at the very least, £135 (assuming 80% capacity factor), would be required by a credit rating agency in order for EDF to achieve is nuclear build plans, according to Dr. David Toke, Senior Lecturer in Energy Policy at the University of Birmingham.

This is more than the figure of around £130 per MWh that offshore wind farm owners are currently being paid; which is made up of two ROCs, worth around £42 per MWh each, plus the wholesale electricity price, around £45 per MWh.

It would mean that consumers would be paying more for their electricity just to support nuclear power.

Capacity market

With the proportion of wind power expected to rise to 25% in the next 10 years, increased capacity is required to cater for days of high demand and low wind.

The capacity market is a strategy being proposed by the Government to find the cheapest way of meeting this demand for extra generation capacity.

It is based on the assumption that 19GW (around 20%) of total generation capacity is expected to go off-stream between now and 2020, compared to around 6GW that closed in the last decade.

However, EDF has announced this week that it is to ask the Office for Nuclear Regulation if it can keep open its existing eight nuclear power stations for a further 10 years.

If this were to happen, there would be plenty of time for extra gas and renewable capacity to be built, which would preclude the need for new nuclear power stations.

In particular, the capacity market strategy favours the construction of new gas plant, with the impact assessment for the capacity market containing an example of how it will benefit a typical new Combined Cycle Gas Turbine plant. It would receive the highest revenues: a total of £275 per kilowatt. This is likely to stimulate the building of new gas-fired power stations.

A capacity market is a significant intervention in the market with potentially substantial administrative costs for businesses.

This will disproportionately affect small generators and new entrants in the market, in other words favour the status quo of the Big Six.

This is not likely to go down well with anyone except the Big Six themselves.

In summary, in their current form, the proposals do not guarantee lower bills for consumers, do not support energy efficiency, and seem artificially to favour nuclear power and gas power generation with no guarantee of meeting the UK’s carbon emission reduction goals. There is also no guarantee that they will be permitted by European Union rules.

Uncertainties shroud implications of Energy Bill proposals

The Government's draft Energy Bill contains increased support for nuclear power, but will not quickly dispel uncertainty for potential investors in low carbon Britain.

Electricity bills for consumers are likely to rise by between £100 and £200 as a result of price guarantees over long time periods to new nuclear power station developers for the electricity they will produce.

These guarantees come in the form of something called “contracts for difference", the difference being that between the cost of producing the electricity and the current market price.

Speaking on BBC Radio 4 this morning, both Tim Yeo, Chairman of the select committee on energy and climate change, and Ed Davey, Energy Secretary, attempted to argue that this was not a subsidy but an incentive.

Whatever the specifics in the bill, the remaining uncertainties surrounding it will continue to include:

• the legality of any subsidy for low carbon technologies with regard to European rules on state aid
• the identities of the counterparties for the contracts for difference
• whether the Treasury is going to keep its cap on the cost to consumers of the incentives
• and whether the government will accept the recommendations of the Committee on Climate Change that emissions need to be cut to 50g of carbon dioxide per kilowatt-hour by 2030, to provide certainty to investors.

It was the Treasury that put the limit on the cost to consumers of the solar feed-in tariffs. It would be ironic in the extreme if it were to make an exception in favour of nuclear power.

There are also uncertainties about whether the public will accept any policy that puts energy prices up.

On BBC's Today programme, the Energy Secretary Ed Davey reiterated Chris Huhne's promise last October that there would be no support for nuclear unless there were similar types of subsidy for renewable energy.

"Unless nuclear can be price competitive," he said, “as the industry says it can be, these nuclear projects won't proceed."

He said that the Bill will try to avoid the bias towards gas that exists at the moment in the market and create a market structure with different incentives.

"We need to decarbonise the economy in the most affordable way that is fair to consumers.

"No one knows exactly what price consumers will be playing for electricity in the future because no one knows how prices are going to rise.

"We do know that if we don't reform the electricity market then they would be rising by at least £200."

He reminded listeners that consumers in this country are in general paying less than in the rest of Europe for electricity.

Dr David Toke, senior lecturer in Energy Policy at the University of Birmingham, believes that nuclear energy in the UK is a "dead duck" that cannot be resurrected.

He compared trying to sell investment in nuclear power to trying to sell Greek government debt bonds: "ridiculously high rates of return are required which mean ridiculously high electricity prices have to be charged".

Dr. Toke said that nuclear power is "unnecessary in the mix and that the measures in the energy bill are designed, as Patricia Hewitt admitted, in particular to support nuclear in particular and not renewable energy or energy efficiency.

"The proposals are restricting them because they are cumbersome. Credit investment agencies don't like nuclear," he said. He predicts that nuclear newbuild “won't happen unless the coalition government tears up its manifesto commitments and gives the nuclear industry a blank cheque".

Tim Yeo, chairman of the Energy and Climate Change Select Committee, said the bill needs to address "very precise questions" about the incentives.

"We hope that the draft bill is going to introduce certainty for ," he said.

“Even if we didn't have a bill, prices are likely to rise," he said, “because the global demand for energy is rising very quickly, so fossil fuel prices will continue to rise."

He said that with the contracts for difference that are at the heart of the bill, “we need to know exactly who the counter parties are with whom the contracts will be made and what the credit status of that counterpart is".

“If it is the government who is guaranteeing the price, then that reduces the risk, which reduces the cost of borrowing capital, which will eventually reduce the cost of electricity. We need this not just for nuclear but also for the other renewable technologies which cannot compete with high emitting fossil fuel technologies.

"It's important to remember that fossil fuel plants are cheaper to build but more expensive to run, whereas with renewables and nuclear it's the other way round."

He pointed out that we already have subsidies for renewables in the form of the renewable obligation certificates, which affect electricity bill prices.

Call for wind farm developers to do more for communities

Helping communities to develop their own local renewable energy resources could boost the local economy and improve participation in community activities, according to a new report from the Joseph Rowntree Trust.

It says that the Government, instead of reforming planning processes to force unwanted schemes on towns and villages, should instead consider ways in which communities can benefit from low carbon energy.

The report, Wind energy and justice for disadvantaged communities, says that it is not simply about large companies giving a share of their profits to local communities when they put a wind farm in their neighbourhood.

Instead, it should be about bolstering local resilience in the face of difficult economic conditions and rising energy prices, which can have spin-off benefits in terms of improving local facilities and promoting a sense of community spirit.

The report does not consider community-owned schemes, which have their own, separate benefits. Rather, it examines how commercial, large-scale schemes can be more embedded in their locality. It calls on developers to directly invest in community resources or environmental enhancement.

There are community benefit funds from wind farms that now exceed £100,000 a year. As the size of these wind farms continues to increase so will the funds. With this, the report says, “comes the opportunity to achieve something transformational".

This “exciting vision" could, in 25 years time, leave communities with a more “sustainable, autonomous, locally embedded energy system, which retains more local employment and generates funds for other goals".

It quotes research showing that large wind farms tend to be in areas of social disadvantage, or of lower population and lower incomes. These include West Wales, Cornwall, Lincolnshire, North East England, Lothian and Scottish Highlands. By contrast, the affluent counties of southern England, often the most vocal against wind farms, have very few such facilities.

This is not surprising, since remote areas tend to be both windy and socially deprived. But it does show that there is an opportunity for wind farms to redress the economic disadvantage experienced by these areas.

The report cites communities already existing across the country with this transformational aspiration.

One example is that of Argyll and Bute, Scotland, which decided that the sum of £2000 per megawatt of installed capacity should be the minimum payment of the community benefit, with an additional £1000 per megawatt based on the actual output of the wind farm. 60% of this share of the profit is channelled to the immediate local community through a trust fund, and 40% to the wider community.

Another example is Forestry Commission Wales, which manages a lot of upland coniferous plantation land on behalf of the Welsh government, that is made available for developers. Tenders for wind farms are evaluated with considerable weight given to community and financial dimensions: 60% in total, with just 40% given to technical aspects.

Finally the report looks at an example of offshore wind near Lincolnshire on the east coast of England. Here, community benefits have been substantially shaped by the developer, Centrica. For example, they have invested in a local community centre to give it heating and hot water, and provided a visitor centre and education officer.

The report has been welcomed by RenewableUK, which points out that already in Scotland there is a national register detailing community benefits already agreed with developers to help other communities negotiate with developers.

There is also an emerging UK-wide Coastal Communities Fund, which is beginning a debate about the equitable division of profits between the government and local communities, in cases where projects are developed on land owned by the Crown.

Many companies are seeing the benefits of investing in local communities. In Scotland, Scottish and Southern Energy are increasing their standard community benefit offer to £5000 per megawatt, half of which is put into a “Scotland Sustainable Energy Fund" with the aim of supporting the development of skills, community energy schemes and environmental improvements in the wider region.

The Rowntree Report concludes by saying: “The prize is a significant one: a low-carbon energy revolution that not only addresses global obligations to future generations, but which fosters long-term resilience in the communities that live alongside the infrastructure".

Cameron urged to put green economy at heart of plan for growth

Joan Walley, Chair of the MPs' Environmental Audit Committee, has called on the Prime Minister to show leadership in the run up to the Rio Earth Summit and put the green economy at the heart of the Government's plans to revive the economy.

"Out of the ashes of the financial crisis we need to rebuild an economy that enhances human well-being, protects the natural world and delivers food and energy security for the future," she said, as she launched a new report on the green economy by the Committee of cross-party MPs.

The MPs want green investment to play a key part in the economic recovery, but they feel that the Treasury still regards environmental measures as a cost not a benefit to the economy. Expenditure involved in making the transition to a green economy should be seen as an investment in a positive future, they argue.

The report criticises the existing strategy, 'Enabling the Transition to a Green Economy', for being too focused on voluntary action and failing to set a clear trajectory or any time-bound milestones for businesses to achieve.

Investing in renewable sources of energy would increase our energy security by reducing our reliance on imported fossil fuels and create jobs, it concludes.

What is needed is a green economy strategy, the report says, which is Treasury-led and addresses the economy as a whole, and it calls on the Treasury to publish its definition of an environmental tax. This would enable it to measure whether the Government is meeting its commitment to increase the proportion of environmental taxes.

Mandatory emissions reporting

Defra is also criticised for delaying the introduction of mandatory emissions reporting for big business, and the MPs hope this doesn't mean it will never be introduced.

"Making businesses report their carbon emissions is one of the first steps we need to take on the road to a green economy, so it will be a key test of this Government's green credentials," they say.

"The Government promised a roadmap to a green economy, but two years in it seems to have stalled and we risk slipping back to business-as-usual," added Ms. Walley.

"Rising global demand for commodities and fossil fuels mean that prices will continue to rise in future, so it is incredibly short-sighted of the Treasury not to give businesses clear incentives to use resources in a smarter way."

Defra did, in March, publish its Resource Security Action Plan: making the most of valuable materials, which sets out the risks and opportunities for businesses stemming from our reliance on the specialty metals and minerals used in technology, but it lacks specific targets and financial support to business.

The Government's roadmap to the green economy also lacks long-term vision, the MPs say, warning that the recent financial crisis has shown how great are the risks of relying solely on a market-led approach, particularly when the market value of services provided by nature, such as clean water and crop pollination, are not valued on corporate balance sheets.

Red tape is often a green safeguard

Furthermore, Government plans to 'rationalise' environmental regulations must not be a smokescreen for relaxing rules protecting our health, countryside or wildlife in a short-term pursuit of growth, the report also warns.

The Government has pledged to reduce over 10,000 pages of regulatory guidance, following its 'Red Tape Challenge', to help businesses comply with environmental laws. But the MPs point out they have an important role in safeguarding our health and the environment.

Joan Walley said: "The Treasury seems to see environmental regulations as nothing more than costly red-tape, but what we are talking about here are vital laws to give us clean air, safe food, and a thriving countryside.

"If this process reduces bureaucracy and improves outcomes," she says, “we will support it. But it would be irresponsible to get rid of sensible regulations in a desperate dash for growth."

She said they will be keeping a careful eye on Ministers to make sure that rules are not relaxed unnecessarily.

The MPs therefore urge the Government to:

• develop minimum sustainability standards
• set out how data on natural capital in the National Accounts will be used
• develop targets for improving the state of the environment
• establish transparent reporting by business
• use the Natural Capital Committee's work on a 'natural asset stock check' as an indicator to measure the green economy.

Simultaneously, they call for a new definition of the green economy that includes all three interdependent pillars of sustainable development, including the social aspects, well-being and environmental limits.

It also says the Government should set out how it intends to use its procurement expenditure to develop markets for green goods and services, and what specific changes it intends to make to meet the requirements of the Public Services (Social Value) Act.

Apple to power its cloud with the sun

Computer giant Apple has announced it will power its main US data centre entirely from solar energy by the end of the year.

It plans to invest an unspecified amount in solar generation capacity sourced from SunPower Corp, plus solid oxide fuel cell technology from Bloom Energy.

The fuel cells will supply stored power generated from the sun, when it isn't shining, and use a ceramic powder instead of platinum to produce electricity with greater efficiently than traditional fuel cells.

They operate at extremely high temperatures, typically above 800°C, which improves their electrical efficiency.

Bloom Energy already supplies Google, eBay and Walmart as well as Adobe Coca-Cola and other household names.

SunPower Corp was the foremost commercial solar installer in the United States last year.

According to Apple's CFO Peter Oppenheimer, the investment will benefit its North Carolina facility, which holds the servers that host its iCloud data services.

The solar farm will provide 84GWh of energy annually, more than sufficient to power the data centre.

This data centre is not the only one used for the iCloud by Apple, but it is the main one.

Greenpeace last month challenged Apple in its report “How Clean is Your Cloud?” that it was not as green as Facebook and Google.

Data centres contain thousands of computers that store and manage the world's rapidly growing accumulation of data for consumption at a moment’s notice. They consume a tremendous amount of electricity. IT in total is responsible for around 2% of global GHG emissions [this sentence corrected since publication - see comments below].

But Greenpeace says that most IT companies are rapidly expanding without considering how their choice of energy could affect climate change.

Greenpeace said that Yahoo and Google both continue to lead the sector in prioritising renewable energy to power their cloud expansion.

It accused Amazon, Apple and Microsoft of rapidly expanding without adequate regard to the source of electricity, and of relying heavily on dirty energy.

It applauded Facebook for committing to power its platform with renewable energy, and Akamai, responsible for carrying a much internet traffic, for being the first IT company to begin reporting its carbon intensity under the new Carbon Utilization Effectiveness (CUE) standard.

In response, two weeks ago, Microsoft promised that it would go carbon neutral after July. Its chief operating officer Kevin Turner said that it would use carbon offsetting and improved energy efficiency.

Greenpeace criticised Microsoft however, because carbon offsetting still allows it “to keep building data centres that rely on coal, such as its new investments in Virginia and Wyoming".

Apple, however, appear to have listened to Greenpeace's advice.

The new Energy Bill should abandon support for nuclear newbuild

The draft Energy Bill expected this week should face the reality: it makes more sense to give 100% support to renewable electricity and energy efficiency than to continue trying to attract interest in expensive nuclear newbuild.

Last summer's Electricity Market Review White Paper assumed that the UK would soon have 16 GW of new nuclear capacity, with the first new nuclear reactor scheduled to become operational in 2018. Less than a year later, this now seems laughable.

The truth is that the ongoing fiscal crisis in the Eurozone means that the cost of capital is only going to rise. It is the high initial cost of new nuclear power stations and their long payback period that is the reason why nuclear operators are already pulling out. The coming fiscal firestorm will be the final nail in the coffin.

With the Government due to publish its new Energy Bill, now is the time for it to recognise this reality and stop trying to flog a dead horse. Otherwise, its pro-nuclear policy risks spending far more public money than it already has on feed-in tariffs for solar photovoltaics. It will make that amount of cash look like a drop in the ocean.

It's right for the Cabinet to worry, as it is doing, about whether the Green Deal will work. But it would be even more sensible to re-examine its policy on nuclear power - or it will start to look like the white elephant in the room.

EDF is the only nuclear operator with a modicum of credibility still in the running for newbuild, although Charles Hendry and the Financial Times would have you believe some Chinese operators are interested in Horizon. But with the advent of François Hollande, known to be lukewarm on nuclear power, to the French presidency, the enthusiasm of this 85%-French state-owned company for the construction of the most likely new plant at Hinckley point in Somerset is likely to cool.

EDF has already postponed the groundwork preparations for the site until next year while it waits to see what happens. The agreement which David Cameron signed on nuclear power with Nicolas Sarkozy in February is now not worth the paper on which it is written. It didn’t even represent much at the time.

Energy Minister Charles Hendry continues to talk up nuclear power, but he might as well be asking banks to invest in Spain. Two weeks ago he told the Nuclear Institute that RWE and E.ON’s decision to withdraw from Horizon's plans to build new power stations at Wylfa and Oldbury was “very disappointing", but he still hoped that the Energy Bill's proposed Contracts for Difference and other electricity market reforms would give investors the certainty they need to invest in new nuclear power.

You can understand why he wants to keep the Government’s options open. But it's a wise gambler who knows when to fold. The Government should instead put its limited resources in the service of solutions that have a much higher probability of working.

These resources include £13 million of DECC's budget currently spent on promoting nuclear power.

But, you say, what of the need to keep the lights on? There's more than one way to fit a lightbulb. Last year's White Paper's impact assessment argued that wind power, being easier to start up, would be turned off by system operators, in periods when it could generate and when demand is low, in preference to nuclear, because the latter is much more expensive to start up after shutdown.

This automatically penalises wind power and favours nuclear. Nuclear is seen as baseload, whereas wind, because of its intermittency, is not.

In the intervening time since the publication of the White Paper, more gas-powered generation has been consented. Because it can both supply baseload and is easy to start up and turn off, this gas-fired capacity negates the need for new nuclear power.

It also means that offshore wind power, tidal power (Peter Hain's new version of the Severn barrage that will be financed by private investment and produce as much as for nuclear power stations), as well as sustainable biomass, which includes anaerobic digestion, can be favoured over gas by system operators at times of low demand.

It also turns out that it is cheaper to strengthen the UK’s electricity grid connections with Europe (and this is being done anyway), widening the range of renewable sources of power, and to expand the facilities for balancing supplies with demand, than it is to build new nuclear plant. This will ensure that the lights stay on even if there is a flat calm over the UK for some time during the winter.

The Government can therefore support the provision of the maximum amount of renewable energy while maintaining a strategic reserve of gas-fired plants, together with a strategic reserve of fuels to power them.

And with the abandonment of nuclear newbuild, more capital and investment will be available for renewable energy, which will in many cases be quicker to build.

Cheaper electricity

A change in policy would also make future electricity costs lower for consumers.

This is because the Feed-In Tariff Contract for Difference policy is currently designed to benefit nuclear power the most, at a cost to consumers: the reduction in the cost of capital using this mechanism is, according to the EMR White Paper, 1.5% for nuclear, compared to 0.5%-0.8% for offshore wind; 0.5% for biomass; 0.4% for coal with CCS; and 0%-0.3% for onshore wind.

The proposed carbon price floor also benefits nuclear power far more than other technologies. The Treasury Secretary, Justine Greening MP, has admitted that the benefits to the existing nuclear sector are likely to be "an average of £50 million per annum to 2030 due to higher wholesale electricity prices".

WWF and Greenpeace together have calculated that the benefit could be much higher: up to £3.43 billion between 2013 and 2026, i.e., £264 million per year.

Therefore, if both of these policies were modified or abandoned in the new Energy Bill, electricity prices in the future would be lower.

Next week’s Bill will contain these policies, but it is only a draft. It doesn’t have to remain this way.

Revealed: the cost of government support for nuclear power

The full costs of managing the country's stockpile of plutonium was estimated at £3 billion last December.

The Government's budget for developing and delivering new nuclear was £11 million from January to April 1.

And £167 million, or almost 30%, of the Department for Energy and Climate Change (DECC)'s budget went to the Nuclear Decommissioning Authority in the first three months of this year.

These are astonishing figures gleaned from DECC's last quarterly report.

They show just how much the government is spending on supporting nuclear power.

They reveal that DECC is experiencing severe budget cuts at the same time as this is going on, and that this is impacting particularly on delivery of Green Deal measures and the Renewable Heat Incentive.

For DECC, its quarterly budget of £468 million was down to just 52% of the same time last year.

Of this, just £13 million was spent on bringing about a low carbon Britain.

Although the full costs of managing the country's stockpile of plutonium was estimated at £3 billion last December, and this figure dwarfs the other budgets, it is not up to date, the report admits.

Moreover, we are unlikely to find out the true figure even when it is finally determined.

This is because, the report says “it is likely that these [figures] will be commercially sensitive.

"This cost data is therefore not included in the aggregated whole life cost figure for all DECC's major projects."

This means that the public will not know the true amount it pays for managing existing nuclear waste.

The budget for developing and delivering new nuclear is £11 million.

This is almost as much as the £13 million for developing a low carbon Britain - or is it part of that figure?

Of course, the government will argue that this is not a subsidy.

Nevertheless it is taxpayers' cash spent on promoting nuclear power as a policy objective and trying to secure new nuclear power stations, despite nuclear operators pulling out.

The latest companies to be interested are Chinese. Do we really want our new nuclear power stations to be built and managed by Chinese companies?

That £11 million should instead be spent on developing and supporting new renewable energy installations made by British workers in this country.

These would certainly be up and running far earlier than any new nuclear power station.

Everyone on the planet helps subsidise fossil fuels by £45 per year

NASA's James Hansen

Fossil fuel companies get between $400 and $500 billion in subsidies per year. This must end.

The first major scientist to alert the world to the dangers of climate change, NASA's James Hansen, has issued a new challenge to the world based on the latest science surrounding the issue.

In a new paper published on the NASA website, Scientific Case for Avoiding Dangerous Climate Change to Protect Young People and Nature, he calls for governments around the world to stop using public funds to subsidise fossil fuels.

If anything is holding back investment in clean tech to save the planet, this is.

Fossil fuel subsidies

The paper uses scientific analysis to calculate the world’s total subsidies to oil, coal and gas companies at between $400 and $500 billion per year.

That's about £45 for each man woman and child on the planet.

This hardly seems possible, but this is a peer-reviewed paper.

Moreover, these companies are not required to pay their costs to society.

The paper notes that air and water pollution from the extraction and burning of fossil fuels kills over one million people a year and affects the health of many more.

But its greatest costs are likely to be the impact of climate change.

The greenhouse gas emissions from our use of fossil fuels up to now are only a fraction of the potential emissions from known reserves and potentially recoverable resources.

With shale gas, tar sands and other technologies we are seeing more and more of these reserves become economically recoverable.

Without legislation from governments to the contrary, and with these subsidies, there is no doubt that they will be recovered.

Hanson and his co-writers place the blame for the lack of action by the world's political leaders on the “undue sway of special financial interests on government policies aided by pervasive public relations efforts by organisations that profit from the public's addiction to fossil fuels".

In other words by overt and covert lobbying of politicians and political parties by the fossil fuel industry and those that benefit from it.

It is understandable, if not scientifically acceptable, that the UK government wants to continue to exploit the fossil fuel reserves within its waters and under its soil, such as shale gas. After all, other countries are doing.

But it must, morally, resist the temptation.

The scientific imperative is undeniable, and the longer we wait, the harder it will be.

If emission reductions began this year the required rate of decline is 6% to restore the energy balance of the Earth and stabilise the climate by the end of the century.

If reductions are delayed until 2020 the required level of reduction is 15% per year.

If we had begun in 2005 it would have been just 3% per year.

That is the rate of acceleration of the problem.

This transition to a post-fossil fuel world of clean energy will not occur as long as fossil fuels remain so cheap and the market does not incorporate their full cost.

After discussing the current consensus level of scientific understanding of the issues, and outlining all of the possible implications for humanity and the planet, Hanson argues that the initiation of the phase-out of fossil fuel emissions is urgent and that it is necessary to garner public support to fight such influence.

This depends upon persuading the majority that a prompt, orderly transition to a post-fossil fuel world is technically feasible and economically beneficial, aside from its benefits to the climate.

A matter of morality

The costs of climate change, loss of biodiversity, acidification of the ocean, loss of food supply, international conflict, refugee problems and so on will all be borne by young people and future generations.

This makes the issue “a matter of morality; a matter of intergenerational justice".

Hansen and his co-writers conclude their paper by comparing the moral challenge of climate change to that of slavery, “an injustice done by one race of humans to another", so “the injustice of one generation to all those to come must stir the public's conscience to the point of action".

Hanson expresses surprise that more young people are not shouting for change. Perhaps they are disillusioned with politics or unaware of the threats and possibilities.

But he does put his faith in the judicial system. He says that in some nations it may be possible to apply legal pressure to governments to develop realistic plans to protect the rights of young people and those yet to be born.

“Such a legal case the young people should demand plans for emission reductions", the paper argues.

Carbon tax

It then discusses what economic levers might be employed to engage the transition to a post-carbon future, plumping for a carbon tax.

It quotes economic analysis that indicates that a tax beginning at $15 per tonne of carbon dioxide per year and rising by $10 per ton each year would reduce U.S. emissions by 30% within 10 years.

He is not a supporter of-and-trade because politically it has not found favour.

But a rising price for carbon emissions would not be sufficient on its own. The writers advocate considerably more investments in clean energy and carbon efficiency standards for buildings, vehicles and other products; global climate monitoring systems including and climate mitigation and adaptation in undeveloped countries the planting of forests.

I will let James Hansen and his co-writers finish this piece in their own, eloquent, words:

"The era of doubts, delays and denial, of ineffectual half-measures, must end. The period of consequences is beginning.

"If we fail to stand up now and demand a change of course, the blame will fall on us, the current generation of adults.

"Our parents did not know that their actions could harm future generations.

"We will only be able to pretend that we did not know. And that is unforgiveable."

New body formed to drive energy efficiency in buildings

 Dr David Strong, chairman of the new Energy Efficiency Partnership for Buildings

The Energy Efficiency Partnership for Buildings has been set up to become the largest network of potential Green Deal providers, financiers, product and service suppliers in the UK.

It intends to become a hub of expertise to represent industry’s views on the practical implementation of Green Deal, ECO and wider energy efficiency opportunities in the UK, and has received the backing of a significant group of founding members, including npower, Strutt & Parker, Centrica, Kingfisher, Enact and Knauf Insulation.

It brings together more than 1,300 individuals from 760 organisations in voluntary cooperation across all parts of the energy efficiency supply chain.

It is a wholly owned subsidiary of the National Energy Foundation (NEF), which provides education and training, technical services, behavioural programs and community work to promote the uptake of energy efficiency measures and sustainable energy technologies.

The NEF is an independent educational charity based in Milton Keynes, and one of the longest established bodies of energy efficiency expertise in the UK.

The EEPB has already been asked by the Department of Energy and Climate Change (DECC) to continue facilitating and coordinating the four Green Deal advisory forums.

These have the job of increasing the capacity of the Green Deal supply chain, setting up the installation, accreditation and qualification framework, promoting energy efficiency improvements across different building tenures, and developing a Green Deal advice framework for consumers.

The EEPB will also be helping to advise DECC on the implementation of the Government’s Microgeneration Strategy.

Dr David Strong, chairman of the EEPB, said: “The creation of the EEPB comes at a very significant time. Organisations across all parts of industry, all parts of the product and delivery sectors, and all parts of the private and public sector are seeking to collaborate and find answers to how we make the most of the new energy efficiency policies coming through from Government.”

f

He said his priority was to look at "how we overcome market barriers and unlock opportunities from Green Deal and ECO, especially for SMEs".

He said they will be talking to all stakeholders to develop answers to these questions.

Michael Verity, Equity Partner at Strutt & Parker, said: "Most of the jigsaw pieces are available but putting them together is the major challenge."

Steven Heath, External Affairs Director for Knauf Insulation, said that the timing of its creation “has special relevance to the Green Deal," but said that their pursuit of answers will “no doubt throw up as many complexities in its delivery as in its conception. This is especially true of the nascent non-domestic sector".

However, he was optimistic. "The Energy Efficiency Partnership for Buildings will be well placed to identify these complexities, offer solutions and act as a conduit for concerns between the energy efficiency supply chain and Government.”

For RWE npower David Titterton, Domestic & Obligations Director, said his company was "backing the Energy Efficiency Partnership for Buildings because it provides access to a network of real value".

The Energy Efficiency Partnership for Buildings will engage with all key Government departments involved in policy formulation and implementation, including:

• DECC which is responsible for energy and carbon policy, Green Deal, the Energy Company Obligation, microgeneration and fuel poverty (England)
• DCLG for building regulations, EPCs, planning and local authorities
• BIS for construction industry, skills and consumer protection
• Defra for product policy and standards
• in addition it will offer support to Treasury and the devolved Governments.

Green Party celebrates election wins: England's fourth favourite

The Green Party is celebrating having cemented their position as the fourth most popular party in England after yesterday's elections.

At the time of writing, with results in from more than half of England's councils, and against a strong popular swing towards Labour, they have increased their total number of councillors by four, and their average share of the vote by one point to 9%.

The party contested 943 seats in 119 councils and was defending 22 seats it already held.

Its candidate for the London Assembly for Lambeth and Southwark, Jonathan Bartley, claimed that the results showed his party was gaining wide appeal. “This is clearly not a single issue party any longer,” he said.

Nuneaton gained its first Green councillor in the person of Keith Kondakor, and so did Dudley where Dr Will Duckworth gained a seat.

Three seats taken in the West Midlands from the Conservatives were done so with large swings.

In Norwich, the party held all six seats with increased percentage counts, keeping its record of never losing a single seat at the ballot box.

A Labour majority in Sewell Ward was reduced by 290 votes by the Green Party candidate Howard Jago.

In Bradford, where the Respect Party took the Leader's seat, the Green Party retained the three seats it already had, but increased its support in the Shipley ward where Martin Love obtained a majority of 1,461, the highest ever Green majority in a ward.

However, they lost their only seat on Cambridge Council after their candidate Adam Pogonowski defected to Labour just before polls opened, claiming that he wanted to be part of “a bigger party that has real power to make a difference to people”.

The results in Cardiff are eagerly awaited where the party fielded 37 candidates.

The Green Party issued a statement calling yesterday's local elections "a day of steady progress for Green politics".

Councillor Andrew Cooper, Chair Association of Green Councillors, said the results showed the party was gaining wider appeal and that where Greens have been elected and stand on their record, voters approve their performance and re-elect them.

"This is a party coming of age, which is showing that when it gets stuck into local issues like housing, it can actually make gains and then hold on to them despite the swings of the big three parties."

More results are expected later today followed by the count for the London Mayor and Greater London Assembly with the result expected this evening.

Jenny Jones is the Green candidate for London mayor.

Perhaps the media will start giving the party more attention from now on.

Has George Monbiot changed his tune on nuclear power?

George Monbiot "chatted" with a select band of fans on the Guardian website yesterday.

After a difficult start, for me what was interesting was what George said on nuclear power.

He has been much criticised for coming out in support of nuclear power, not least by me.

When asked about this by Nicholas Jackson, one of the people “hanging out", all he could manage to say was that he opposes the closing of existing nuclear power stations, and did not propose the building of new ones.

These are obviously too expensive, otherwise so many companies would not be pulling out.

This seems to represent a moderation or scale-back of his previous standpoint, which was basically supporting the Tories' position and calling for more nuclear power to tackle climate change, as evinced by his letter to David Cameron in March.

I hope he has been listening to those who, rightly, point out that by the time any new nuclear power station gets built, the window of opportunity to reduce carbon emissions sufficiently to minimise the threat of catastrophic climate change would have passed.

It is far better to spend the equivalent amount of investment, political energy and technical skill on energy efficiency and other low carbon generation technology which can be implemented far more quickly.

This was confirmed by one commentator, who wrote "As a nuclear physicist, I can only say that his views on nuclear energy are appalling; at best, a false dichotomy - it is NOT just a choice between fossil fuels and nuclear.


"I can lay you out a simple scenario of renewables, achievable faster than nuclear newbuild + cheaper, safer, longer-lasting.

"And that's based on existing technology - if all the wasted nuclear subsidy/research money were to be allocated to renewables, much more is possible."

Government energy policy splits laid wide open

Veteran environmentalist MP Tim Yeo has called the energy minister Ed Davey and his department "weak",  and slammed tjhe Treasury,  and other departments for interfering in the UK's carbon-reduction and energy policies.

Speaking at today's UK Energy conference organised by The Economist magazine, Tim Yeo, Chair of the Commons Energy and Climate Change Select Committee, slammed the Treasury for constantly interfering with DECC's activities and policy development, confirming (which is news to no one who has been following environmental issues for 30 years) that the Treasury is not at all green.

He didn't stop there, but also laid into the Department for Communities and Local Governments, and the Department for Transport.

He labelled DECC a “weak department" for letting its policies be "crawled all over" by these three other departments and called Ed Davey a “junior partner" in any negotiations.

Referring to the carbon price floor as “the Treasury's latest wheeze" and “simply a way of getting more tax", he said that “the UK needs a carbon price signal not a carbon price floor, which is having the opposite effect to what George Osborne claims".

This is the first time there has been such open admission by an MP at a major energy conference of the existence of such high conflict between these government departments.

Yeo said that if Britain wants to be in the “premier division" internationally in 15 years' time, then energy needs to be higher up the priorities for the Government.

Despite this, he said that the required level of investment in UK energy infrastructure, of £200 billion by 2020 is “achievable", although he said there is no 'plan B' if we fail.

He said that the technology is already to hand to solve our energy crisis but that we don't yet have the right policies and price signals. He expressed alarm that firms like E.ON are pulling out of nuclear power in the UK.

While saying that the UK cannot rely on fossil fuels, whose price will rise due to rising demand, Yeo, a veteran Tory environmentalist, advocated that “we should exploit the shale gas resources we have in this country".

Yet in the same breath he said that replacing coal with gas “doesn't get us anywhere near the Committee on Climate Change 2030 decarbonisation target".

On fuel poverty, he said that it can't just be solved by changes to energy policy because it is also a Social Security issue.

Tony Cocker, Chief Executive Officer, E.ON UK, blamed a pause in investment on last year's review of the Renewables Obligation banding levels, and its (in investment terms) imminent demise in 2017.

Electricity market reform delay

Cocker, said that the UK needs the electricity market reform to happen speedily and not just be a “make do and mend" solution. "We are not asking for an extension of CERT and CESP we are pretty sure we can hit the targets" we have on fuel poverty, he added.

All the panel agreed that certainty was urgently needed on the planned reforms, especially in the light of alarming reports by the BBC last night that legislation on the topic would be postponed this summer to make room in the parliamentary timetable for reform on the House of Lords.

This was immediately denied by a Department for Energy and Climate Change spokeswoman, who said, “This is categorically untrue. We have said for some time that we intend to legislate for electricity market reform in the forthcoming session of Parliament”.

On the issue of energy pricing and investment, Cocker said of E.ON “We need the trust of our customers to create a sustainable energy system", somewhat ironically given the number of protesters outside the conference who were not permitted to enter.

He admitted that his company “needs more transparency on pricing and profits", and laid the gauntlet down by promising to put the extent of his bonus in the public domain.

The panel chairman, the BBC's Energy and Environment Analyst Roger Harrabin, earlier asked the organisers why protesters who had gathered outside the building, part of a Climate Justice day of action, were not being allowed in, and was told that the conference programme had been changed to reflect popular concerns about fuel poverty, and that they and grassroots organisations would be invited to next year's event.

Raising laughter, Mr. Harrabin summarised six months of energy policy in eight words as: “FiTs fiasco, nuclear no-show, wind whiplash and shale shivers".

Investment challenges

Speaking for the Carbon Trust, its CEO Tom Delay admitted that “sustainable solutions are difficult to invest in because they are capital intensive" and because of the uncertainty around costs.

He said that “light touch energy regulation" is deterring investment in “resilience, efficiency and an overhaul of the National Grid".

However, he advised that “it's dangerous to always focus on cost rather than investment"; it's the lifetime savings on bills that should be the chief criteria for investment decisions.

That is why the quick payback received from investing in energy efficiency makes it an “easier option" for large companies to be sustainable.

He slated UK building standards on energy efficiency for being too low, a decade or two behind those in Europe and North America.

Fuel poverty

The London School of Economics' Professor John Hill, author of last March's landmark Fuel Poverty Review, astonished the audience by explaining that under current definitions of fuel poverty, the Queen qualifies since over 10% of income is spent on fuel.

He said that a better criteria for fuel poverty is to measure the overlap between low incomes and high energy costs.