Energy efficiency is cheapest energy reform, say top UK Government officials

 Chris Pook, Deputy Director of Green Economy, at the Department of Business Innovation and Skills (BIS)

Energy efficiency was affirmed by Government officials from two departments on Tuesday as being by far the cheapest way of meeting the UK’s climate commitments and decarbonising its electricity grid.

Speaking at The Energy Event at Birmingham's NEC, Trevor Hutchings, Head of Strategy and Delivery, DECC, and Chris Pook, Deputy Director of Green Economy, at the Department of Business Innovation and Skills (BIS), both referred to sources of research, including studies by McKinsey, which show that most measures to reduce energy usage have negative costs, compared to building more energy generation plant or carbon capture and storage.

Trevor Hutchings said that DECC's Energy Efficiency Deployment Office (EEDO) is still compiling its evidence base, since its formation earlier this year, and will publish its recommendations in the autumn.

The key challenges, he said, were how to drive innovation to cut costs of both manufacturing and installation, and how to speed up installation.

Thinking up ways of getting the public onside and engendering behaviour change to make it the social norm for people to save energy, is also part of EEDO's work.

Hutchings said that he regarded it as an early success that the UK had played its part in the negotiation of the Energy Efficiency Directive.

This deal, struck in June, was formally adopted by the European Parliament yesterday in Brussels. It clears the way for the Directive to enter force by the end of October, and sets a voluntary 20% energy saving target for the whole of Europe.

However, earlier this month, Greg Barker cast doubt on whether the UK had really signed up to a 20% target, when he responded to a Parliamentary question from Zac Goldsmith by saying that the target “applies to the European Union as a whole. The UK does not currently have a target to reduce primary energy consumption by 20% by 2020 relative to business as usual.

"Under article 3 of the Energy Efficiency Directive, the UK is required notify the European Commission of its indicative target for final energy consumption in 2020 by 30 April 2013."

EEDO will play its part in overlooking the implementation of the Directive, Hutchings said.

The Coalition for Energy Savings believes that the Directive is only a first step towards making energy efficiency the prime consideration for European energy policy. It believes it can secure at least 15% energy savings by 2020, up from the currently projected 10%.

“It is the first time that the EU has established binding annual energy savings targets, combined with a broad range of new energy efficiency improvement requirements covering the whole energy system, from energy generation and distribution to consumption and building renovation," said Stefan Scheuer, Secretary General of the Coalition for Energy Savings.

Speaking for BIS, Chris Pook said that the department had signed up to the carbon budgets set by the Committee on Climate Change. "It aims underpin our policies, but determining those policies is complex," he admitted. “Electricity market reform, the Green Deal, and the carbon price floor, are all problematic."

The division in Government over energy policy is even more apparent since the Cabinet reshuffle, with Vince Cable's speech on his industrial strategy yesterday overshadowed by calls from business leaders to get the rest of the Cabinet on his side, if he wants it to be a success.

At this week's Energy Event, energy-intensive users expressed delight at the recent ministerial appointments. Andrew Bainbridge, Chairman of the Major Energy Users’ Council, said that at last they might "see some sense" in government energy policy. These users are worried that a planned carbon price floor will raise their electricity costs above those of European rivals.

The MEUC is encouraging its members to take on board energy efficiency, however, and launched yesterday the third in a series of workbooks linked to training sessions, called How To Accelerate Your Energy Efficiency Training Programme, written by Dr John Ryan.

Peter Lilley: the conflict of interest that makes him against renewable energy

Tory MP Peter Lilley telling dinner party guests celebrating 20 years of diplomatic relations between Uzbekistan and the UK last February, that the former is a "significant market for exports and opportunities for investors" from the UK; he himself is a non-executive director of an oil company exploiting its resources.

Peter Lilley exposed his peculiar understanding of the oil industry in Parliament this week. The poor man is a dinosaur relic from the Thatcherite era. He should be put out to pasture.

He is your caricature Old Tory: voting against laws to stop climate change, for the Iraq war, against smoking bans, for replacing Trident and adores hunting with hounds. He is anti-gay, anti-Europe, anti-freedom of information laws and loves the House of Lords. Get the picture?

So it was refreshing to see him gorgeously slapped down in the debate on the green economy that MPs had on Thursday.

His ignorance is jaw-droppingly awesome. Here is a man who is a non-executive director of an oil and gas exploration company (Tethys Petroleum Limited), for which he gets £47,000 a year for attending a few meetings, who claimed not to know that the oil and gas industry is subsidised.

Countries where Tethys Petroleum is operating. click for bigger version.

Tethys Petroleum Limited has interests in Central Asian countries, principally Kazakhstan, Tajikistan and Uzbekistan. On the company website, Lilley is listed as chairman of the compensation and nomination committee, and is also on the committee which keeps an eye on reserves.

Formerly the Secretary of State for Trade and Industry in Margaret Thatcher's Cabinet and deputy leader of the Conservative party, he is now vice chairman of the All-Party Parliamentary Group on Central Asia.

In this capacity, last February he told guests at a dinner party to celebrate twenty years of diplomatic relations between Uzbekistan and the UK, that the former is a "significant market for exports and opportunities for investors" from the UK. I.e., for people like the oil company he represents.

No conflict of interest there, then.

How is it permissible that a politician with a commercial interest in a certain part of the world is able to influence British policy on it? This is the kind of thing that makes British democracy such a shining example to the international community.

For a chap in his directorial position, you would expect him to know a thing or two about the black arts of financial chicanery and the black stuff. You might also imagine that he would to keep up-to-date with the thoughts of the International Energy Agency.

Forgive me for disillusioning you. Let me quote for your entertainment this priceless interchange from last Thursday's debate.

You need to appreciate that there are, perhaps surprisingly, progressive Conservatives as well as their opposite. One of the former, Laura Sandys, initiated this debate. Her intention was to give some confidence to potential investors in the green economy that the Government is serious, in the light of unfortunate comments from others in her party, particularly in the Treasury.

Here it the exchange:

Laura Sandys: The International Energy Agency states that the fossil fuel sector is currently subsidised by $480 billion.

Peter Lilley: (standing and interrupting in astonishment) In what form?

Laura Sandys: In all sorts of forms, from production right the way through to—

Peter Lilley: (red cheeks fit to burst) Rubbish!

Laura Sandys: Well, by 2020 the subsidy will amount to $660 billion. [I reported on this last year.]

The subsidies come in many forms: tax breaks, loans at favourable rates, giveaways and price controls being some. The figures are broken down here.

Perhaps Tethys Petroleum thinks it hasn't received any. No reduced taxation? I have been idly perusing its annual reports and noticed that it chooses to operate in all three of these remote countries because there are tax advantages in doing so.

In Kazakhstan alone it is sitting on 1.17 billion barrels of oil.

Either Peter Lilley is being economical with the truth, disingenuous, or just has his head deeply immersed in the oilsands.

Even if he is in bed with the oil industry, he doesn't have to pretend that there is no such thing as the low carbon, environmental goods and services sector, as he went on to do in the debate.

He tried to poor crude oil over the recent report on the value of this sector to the British economy, one of the few sectors that is actually increasing in size and making money in this country.

Unbelievably, he sputtered, hardly able to contain his outrage: "What does the sector contain? A quarter of it or more has nothing to do with low-carbon activities at all, but relates to things such as sewage and water treatment, double glazing and controlling noise. Those are all excellent things, but they are not what we are talking about today and nothing to do with the low-carbon economy!"

Peter Lilley believes that double glazing has nothing to do with the low carbon economy. Peter Lilley thinks that the water and sewage services industry, which does a lot of work on reducing emissions and in some cases uses sewage to generate renewable heat and electricity, has nothing to do with the low carbon economy.

Fortunately there were plenty of people in the house last Thursday to set the sad fellow right, including good old Alan Whitehead, who is used to calming sceptics as a horse whisperer calms panicky horses.

The motion, "That this House urges the Government to promote the right fiscal and regulatory framework to accelerate green growth as an intrinsic part of the UK’s economic recovery strategy", was passed. Sighs of relief all round.

The Treasury's Chloe Smith defended her decision not to give oral evidence to the Energy and Climate Change Committee on the Energy Bill by listing all the ways in which the Treasury loves DECC, adding: "I fully agree with those who have said growth and greenness are not mutually exclusive. We can have both."

Is that the best she could manage? She was immediately scolded by Laura Sandys, who is on the Committee: "I do not think that anybody would presume that it is a question of either green growth or industrial growth and GDP. In my view, they are one and the same."

Ms. Sandys concluded the debate by hoping that it had contributed to building investor confidence in Government low carbon policy: "I know that the Minister’s contribution has underpinned what this country requires to build on that growth: investor confidence, clear policies and a commitment to a green economy for the future. We need to take measures to deliver for UK jobs and our wider economy."

Peter Lilley spoke last month at a Policy Exchange event on Communicating Climate Change on the Right. He was revelling in the fact that he voted against the Climate Change Act. It's not that he doesn't believe in anthropogenic climate change. It's that he doesn't think it is necessarily a bad thing.

He is entitled to his views. But as an MP with an interest in the fossil fuel industry who is fond of quoting Margaret Thatcher, he is in grave danger of being seen as an old fossil himself.

Laura Sandys, by contrast, is a sustainable resource.

Industry calls for greater support for decarbonisation

 As George Osborne vows to cut support for onshore wind, business leaders call for the opposite.

Business leaders have called upon the government to provide a more stable, consistent and sufficiently long term set of policies to enable the transition to a low carbon economy.

In a new report by think tank IPPR, Growing pains: British industry and the low-carbon transition, which is based upon conversations with senior executives in many sectors at the forefront of this transition, the leaders also call for specific industrial strategies targeted at the different sectors.

The findings suggest there are plenty of opportunities for British companies to participate in this fast growing global business sector. According to figures to be released next week by WWF, in their annual Clean Economy, Living Planet report, in 2011, the global sales value of greentech manufacturing, from manufacturing inputs like silicon to end products like biofuels, came to €198 billion ($245.3 billion), double the figure in 2008.

Reg Plant, one of the authors of the IPPR report, put an even higher value, of £2.27tn, on the global market for wider environmental goods and services, and said it was growing by 4% a year.

“The government should work far more closely with industry," say the business leaders, in order to counteract the perception that its policies are muddled, overlapping, continually being changed, and not farsighted enough, particularly for the period after 2020. All sectors considered mid-term targets (to 2030) to be important, for providing greater clarity and consistency with current investment timeframes.

Support for onshore windpower

The Government continued to give mixed signals to industry over the weekend, with the news that George Osborne was seeking to reduce the level of Renewables Obligation support for onshore wind power, after April 2013, by five or ten per cent more than that which had been proposed by the Department For Energy and Climate Change, due to pressure from backbench Tory MPs.

Tim Yeo, Conservative leader of the Select Committee for Environment and Climate Change, led the criticism of this move by saying that it made absolutely no financial sense to do this, since "you get more carbon reduction for your money by subsidising onshore wind than you do by subsidising the more expensive offshore wind power".

One British company which would be affected by such a savage and politically motivated cut in support for onshore wind, is David Brown Gear Systems, which has been manufacturing gear sets for 150 years and is based in Huddersfield and West Bromwich. The company has found the wind sector to be a core market for the business, last year receiving a £2 million grant from the regional growth fund to invest in a state-of-the-art R&D centre for wind gearbox technologies.

Carbon price floor

Amongst other Treasury policies that business leaders say should be amended or scrapped is the carbon price floor. Currently, this is specifically designed to encourage investment in nuclear power which, they say, would skew precious investment at a less effective technology. "It is ill-designed as it reduces British competitiveness, won't cut emissions and will drive up fuel bills pushing more people into fuel poverty," said Reg Plant.

Call for more partnerships

Business leaders also call in the report for “strategic public-private partnerships at the sector level based on the model successfully pioneered by the Automotive Council", which brings together leading industry players, policymakers and expert academics. This would help to identify and tackle barriers to development such as infrastructure, skills and financing requirements.

Many leaders criticise the Carbon Reduction Commitment and called again for an industry-by-industry approach to emissions reductions, with incentives such as support for research and development.

Business leaders also think that greater collaboration with European partners on low carbon innovation is advisable, to target possible technological breakthroughs. Pooling member state resources and encouraging countries and businesses to work together is cost-effective, attractive to investors and could deliver greater returns.

The UK is already doing this in the areas of carbon capture and storage (CCS) and offshore wind but the pace of change should be speeded up, they say. One way of doing this is with the help of a new European programme modelled on the governance structure of the EU's NER 300 programme, which subsidises installations of innovative renewable energy technology and CCS, and is funded by a set-aside of 300 million allowances from the European Emissions Trading Scheme.

Transport sector

Government support is also called for to help the transport sector, which is responsible for 21% of the UK's emissions, to decarbonise. In particular, despite government efforts by the offer of a grant of up to £5000 to purchase an electric vehicle, there has been little effect on the market, partly due to the high upfront cost but also to the lack of charging infrastructure.

There is also a lack of tax harmonisation on vehicles across EU member states, leading to the fact that the same car model can be effectively taxed at different rates in different countries. But addressing this issue would pose a huge political challenge, since taxation policy is largely a matter for individual states.

Several leaders called for greater integration between the energy and transport roadmaps, which would include “explicit modelling of the consequences of the electrification of transport for the electricity and gas sectors", otherwise, if the grid was not decarbonised fast enough, more electric vehicles on the roads could increase carbon emissions.

Manufacturing sector

In the manufacturing sector, the vast majority of executives interviewed for the study were ignorant of the long-term vision set out in the various EU 2050 roadmaps. This uncertainty, say the report's authors, “could reflect the increasingly short-term perspective within which many manufacturers operate".

In principle, however, when it was explained to them, participants supported the roadmaps because they provided policy direction and milestones that businesses can work towards.

A particular incentive for the manufacturing sector would be a type of 'green deal', which would help them to invest in low carbon and energy efficient technologies. A pilot scheme for small and medium-sized manufacturers should be established as a first step.

One company involved in energy is Ceres Power, a spin-off from Imperial College which manufactures fuel cell technology for use in small-scale combined heat and power systems. Despite having identified a market of 14.5 million households in the UK and aiming for a market launch in 2014, it sees its next step as being far from straightforward. It requires a significant injection of capital to finalise product development and scale up its manufacturing, which would normally come via equity finance.

But as a result of the economic downturn this has proved difficult, so it is now investigating corporate venturing, which means partnering with a large energy utility or manufacturer. Even this is difficult and, to make things easier, it is calling for the Treasury to introduce “more tax incentives for corporate investments in SMEs, together with any capital gains and dividends from these investments".

All in all, the report paints a picture of an industry full of enthusiasm, but continually frustrated by the slow pace of change and inconsistent support from government.

Low Carbon Innovation Survey

Coincidentally, in June and July, the Department of Energy and Climate Change (DECC) is surveying firms on their levels of investment in innovations that result in reductions in greenhouse gas emissions. DECC says it is also keen to investigate drivers of and barriers to investment. This will help inform the development of future innovation support programmes.

DECC says it is keen to hold brief telephone interviews with a wide range of companies active in the low carbon sector. If you would be interested in taking part in this survey, please enter your details here. If you would like further details about the survey, please contact William Lecky in the Energy Innovation team at DECC (William.Lecky@decc.gsi.gov.uk, 0300 068 5080).

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%.

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.