The Feed-in Tariffs review fiasco

With a stroke, DECC has undermined the competitiveness of the UK solar industry in the export market.

Over 80% of respondents to the Government's review of Feed-in Tariffs opposed the deep cuts to the incentives with most calling for more modest cuts and for the retention of high levels of support for community-scale installations for schools, hospitals and offices.

Many investors are now changing their minds about supporting the industry.

The funding for Feed-in-Tariffs comes from everybody's electricity bills - estimated at an average £3 extra per bill by 2016. DECC's argument for the its U-turn on tariffs is that the £860m pot allocated for it cannot get any bigger because consumers would not tolerate the consequent higher bills, especially at a time when energy prices are rising anyway.

Its prime aim is to encourage awareness amongst the general public of the need to save energy and the importance of renewable energy rather than cost-effectively tackle climate change.


Putting solar panels on lots of homes is seen as the best way to do this. It wants to put the money from the FITs into the pockets of householders and not into the pockets of larger concerns.

It's a shame that this is an either-or alternative.

Because unfortunately, those large concerns are not just big companies but community groups and farmers, which flies in the face of the Government's localism agenda. It needs to make an exception in these cases and reinstate the higher tariff bands for PV.

But how successful is the policy at tackling the aim of reducing the country's carbon emissions? Pound for pound of investment, solar PV does not represent good value for money when seen from an environmental point of view in the UK when compared to some other technologies.

The UK does not get a lot of sunshine, except in the very south and south-west, the sun only shines some of the time, and so investment in technologies that can produce renewable and sustainable power all of the time more efficiently will therefore produce more carbon savings [see p. 40-44 of this CERT doc. for the supporting evidence that shows which domestic-level measures produce the most cost-effective savings].

This is where anaerobic digestion (AD) comes in. With a feedstock that can keep it generating every hour of the year, it is also an emerging technology that requires support to get it up and running. It may not be as sexy as PV modules, but it does the job.

The AD industry lobbied for much more support and has been devastated by the result. What it got was an increase in the FIT rates of just 1p. They are now 14p/kWh for schemes up to and including 250 kW and 13p/kWh for schemes up to and including 500 kW.

This is not nearly enough to stimulate further investment in the technology, as Lord Redesdale, chairman of the Anaerobic Digestion and Biogas Association (ADBA) has warned.

With a capital cost of around £7,745 per kWe, AD has the highest cost per MWh of any form of heating for district heating schemes - almost £250; twice the cost of a community biomass combined heat and power (CHP) plant. But put this in perspective: it is not as much as an energy-from-waste CHP plant.

And it has other benefits besides producing heat and power - such as discouraging N2O (a very potent greenhouse gas) emissions and nitrogen pollution by processing farm slurries, and the production of compost which can be sold for soil enrichment.

It is ideal for district heating. The main benefit of moving to district heating a declared Government aim - is saving carbon emissions. Here, anaerobic digestion CHP scores way higher than all other technologies, at around 5,100 kg of carbon dioxide per year compared to a conventional system. (Incidentally, air source heat pumps used for this purpose actually cost carbon compared to a conventional system.)

By the way, these figures are taken from a report commissioned by the Department of Energy and Climate Change itself two years ago on renewable heat and district heating networks.

So it is surprising to hear DECC's Greg Barker say that there is not enough evidence to support the industry's case for greater help.

Its own research shows that if you take into account the implied carbon abatement cost, anaerobic digestion actually ends up being one of the cheapest forms of renewable district heating at less than one fifth the cost of a community boiler using natural gas.

It is still not the cheapest by any means, but this is because the plant is doing more than just burning a feedstock, and because the technology is relatively new.

And the whole point of the Feed-in Tariffs and Renewable Heat Incentive is to bring down the cost over time.

The National Grid itself has said it can see a time in the not too distant future when up to 50% of the gas in the networks is renewable, much of it coming from anaerobic digestion of organic waste.

The Coalition Government is to publish a new anaerobic digestion strategy later this month. While this is not expected to include any more financial help, the more it can do to boost this potentially highly valuable technology, the better.

Carbon market in a slump as climate talks continue in Bonn

As world environment ministers and representatives meet in Bonn for climate talks this week, investors in the carbon market are hoping, probably in vain, for some kind of certainty as to what will happen after 2012.

After five consecutive years of robust growth, the total value of the global carbon market has stalled at $142 billion due to uncertainty as to what will replace the Kyoto Protocol's Clean Development Mechanism (CDM) after next year. The recession has also had an effect on the market.

A report from the World Bank, The State and Trends of the Carbon Market 2011, covering the last five years up to 2010 and issued last week, shows that the value of the primary CDM market fell by double digits for the third year in a row, ending lower than it was in 2005, the first year of the Kyoto Protocol.

The Assigned Amount Unit (AAU) market, which grew in 2009 with strong governmental support, shrank as well in 2010. Finally, the market that had grown most in 2009 allowances under the U.S. Regional Greenhouse Gas Initiative (RGGI) saw that year's gains erased in 2010.

This meant that the European Union's Allowances (EUAs) market became especially important. EUAs accounted for 84% of global carbon market value last year.

If you take into account the value of secondary CDM transactions, their share, driven by the EU Emissions Trading Scheme rose to 97%, dwarfing the remaining sections of the market. If it was not for Europe's commitment, virtually nothing would be happening elsewhere in the world.

Voluntary carbon market

There is good news, however, in another report released last week about the state of the voluntary carbon market, which posted a 34% gain in 2010, trading a record 131 million tons of carbon dioxide equivalent (MtC02e).

This is an annual report by Ecosystem Marketplace and Bloomberg New Energy Finance which gathers data from almost 300 market participants.

While the US accounted for the majority of trading activity, worth $424 million in total, market growth was strongest in developing countries.

Voluntary offsetting is due to businesses' CSR (Corporate Social Responsibility) commitments. These markets are investing particularly in renewable energy and forests.

The need for political commitment

Loss of political momentum on setting up new cap and trade schemes in several developed economies such as the United States and in the Far East, is a further reason for the decline in the non-voluntary sector.

Last week, California's proposed cap and trade scheme was challenged in the courts and is likely to be delayed by a year.

Christiana Figueres, executive secretary for the UN Convention on Climate Change, lambasted the US for inaction on climate change at the Carbon Expo in Barcelona last week.

Andrew Steer, World Bank Special Envoy for Climate Change, summed up the message of the report at the Expo. "The global carbon market is at a crossroads. If we take the wrong turn we risk losing billions of lower cost private investment and new technology solutions in developing countries. This report sends a message of the need to ensure a stronger, more robust carbon market with clear signals.”

The report's authors predict that in the next two years the difference between the gross demand for the cumulative supply of carbon credits generated under the Kyoto mechanisms will be below $140 million, and virtually all of this demand will be from Europe.

Looking beyond 2012, although potentially the demand for emission reductions could reach 3 billion tons or more, so far the only certain demand is from Europe estimated at just 1.7 billion tonnes.

This means there is little incentive for project developers to invest further and create a future supply of emissions reductions.

This is the effect that political uncertainty is having on political and business efforts to combat climate change at a time when its threat is reported to be even greater than previously assumed.

"Carbon market growth halted at a particularly inopportune time: 2010 proved to be the hottest year on record, while global emission levels continued to rise relentlessly,observes Alexandre Kossoy, World Bank Senior Financial Specialist.

“At the same time, other national and local low-carbon initiatives have picked up noticeably in both developed and developing economies. Collectively, they offer the possibility overcome regulatory uncertainty and signal that, one way or another, solutions that address the climate challenge will emerge."

Eight countries receive $2.8m

The World Bank's response is centred around the $100 million Partnership for Market Readiness, launched in Cancun in December 2010, which aims to support mitigation activities.

Last week it dispersed its first funding to eight countries: Chile, China, Columbia, Costa Rica, Indonesia, Mexico, Thailand, and Turkey. Each received an initial grant of $350,000 to help design, pilot, and eventually implement market-based instruments for greenhouse gas mitigation. They will now develop a "Market Readiness Proposal" to detail their plans. Another seven countries will receive grants shortly.

The fund is supported by ten contributors Australia, the European Commission, Germany, Japan, the Netherlands, Norway, Spain, Switzerland, the United Kingdom and the United States which together have pledged nearly US $70 million.

A number of the World Bank's carbon funds and facilities, such as the Carbon Partnership Facility, the second tranche of the Umbrella Carbon Facility, and a new facility for low-income countries currently under development, also respond to future needs by supporting scaled up mitigation and purchasing carbon credits beyond 2012.

Furthermore, the Forest Carbon Partnership Facility is supporting REDD+ initiatives which, to date, have not been included under the CDM. The Bank sees carbon markets as an important and versatile tool to provide incentives for a shift to lower carbon development paths.

Germany's proposed pathway to low carbon and nuclear free future

The conservative German government has published its draft strategy for closing all of its nuclear reactors by 2017. without building new coal fired power stations.

Chancellor Angela Merkel signed a bill last week committing the country to phasing out all nuclear power by the end of 2022. This eagerly awaited document, published by an agency of the German Environment Ministry, led by the conservative Norbert Röttgen, explains how it can do so - five years earlier than expected.

Defying those critics who said it couldn't be done, the study demonstrates how Germany can keep the lights on, avoid importing nuclear power from other countries, meet its carbon emission targets and avoid significant cost rises to consumers.

The question is, if Germany can do it, why can't the UK?

Currently, Germany relies on 23% nuclear and 17% renewables for its electricity.

The strategy proposed is almost the same as that proposed by the previous red-green coalition of social Democrats and Greens which Angela Merkel's conservative party originally opposed.

This strategy and policy reversal has potential worldwide significance, especially if adopted by Merkel and in a week when governments are meeting in Bonn to try and design what will succeed the Kyoto Protocol.

Switzerland has already decided to discontinue nuclear electricity (which provides about 40% of its current needs). Its five existing reactors will continue to operate until the end of their lifespans, the last one due to be decommissioned in 2034. They will be replaced by renewable energy.

Italy is to have a referendum on whether to build more nuclear power stations on June 12-13. Recent surveys show that most Italians are against nuclear power.

"A complete nuclear phase-out by 2017 will reduce the dangers and risks of nuclear power significantly," the summary in the German report concludes. "This will have substantial social benefits that outweigh the modest increases in electricity prices."

In brief, the strategy is to close Germany's 17 nuclear power plants (with a total net capacity of 20.5 GW) by faster development of renewable sources of energy, including biomass solar and wind, and constructing 5 GW of new natural gas combined cycle power generation.

Already, the German government has dropped its threat to impose a one-off cut to the solar feed-in tariff (FIT) in March 2012 a move welcomed by the PV sector for giving it genuine certainty over future policy. This should bring onto the market roughly 2.5GW-3.5GW of new PV capacity each year.

The investment in natural gas generation gives the grid the flexibility in meeting demand that it requires while also helping to meet Germany's targets for reducing carbon dioxide emissions, and the plants can realistically be built within the next six years.

Natural gas is the 'cleanest' fossil fuel, with the lowest emissions per MW, but still it is a fossil fuel. The study does not say whether the gas-powered plants will be fitted with carbon capture and storage which will have implications for Germany's longer term emissions reduction targets, as the power stations will continue to operate for twenty to thirty years.

The IEA put out a report called Are We Entering a Golden Age of Gas? this week, which argued that if the world were to choose a high reliance on gas which seems likely given the current worldwide boom in shale gas then this could lock us into a path of carbon emissions "consistent with a long-term temperature rise of over 3.5ｰC" - which would be disastrous [link is to a YouTube video based on Mark Lynas' Six Degrees book].

"A path towards 2ｰC would still require a greater shift to low-carbon energy sources, increased energy efficiency and deployment of new technologies including carbon capture and storage (CCS), which could reduce emissions from gas-fired plants", it said.

In the last few years Germany has been a net exporter of electricity. Its recent status as a net importer has been temporary, and the study discovered that imports of electricity have been based on price, not shortage of supply and this will continue to be the motivating factor as the reactors are taken off-line.

Many commentators have predicted that the cost of the transition would be high, but the study estimates that consumers will pay just Euro 0.6 to 0.8 cents more per kilowatt-hour. This amount is less than the price swings of natural gas and coal anyway during the past year.

The higher market price for electricity will also cut the cost of the country's renewable energy programme because the differential between the market price of electricity and the average cost of feed-in tariffs for renewables will be decreased.

The oldest nuclear plants and the Krummel nuclear power plants with a capacity of 8.4 GW should go out of service as soon as possible. There is sufficient excess of reserve capacity - around 10 GW - to permit this.

Additionally, Germany today has an estimated 20 GW of emergency generators, most of which are grid-connected, particularly in the areas of trade and industry, and which can be activated for a few hours a year if necessary.

Microgeneration may be eligible for £10,000 Green Deal support

The Green Deal, the Government's flagship scheme for giving buildings £10,000 of energy-saving improvements, will include microgeneration technologies like heat pumps and solar power.

Climate Change Minister Greg Barker has published further details of how the Green Deal scheme will work, with a draft list of measures that the scheme will permit to be financed; a Green Deal Code to protect consumers; and details of the new Energy Company Obligation (ECO) to tackle fuel poverty.

Businesses as well as householders will be able to access up to £10,000 upfront to pay for energy efficiency work, repaying the costs through savings on energy bills from next year.

Consumers will get BSI quality assurance from a Green Deal Code of Practice which will cover providers and installers, and a Green Deal advice line will be set up.

The principle of the Green Deal is being called The Golden Rule, under which expected savings from measures will repay the costs over 20-25 years. The cost-benefit levels for each measure are still being calculated.

Consumer groups are welcoming the proposals. Audrey Gallacher, head of energy at Consumer Focus, said: "Particularly welcome moves are the introduction of an independent advice line and more robust complaints handling and redress measures. This should not only help consumers make informed decisions on products and services, but mean support is there if things go wrong.

"The Green Deal will be sold through a spread of providers from energy companies to DIY chains."

Confirming what I've observed myself before, Richard Lloyd, CEO of Which?, cautioned that: "Our latest research into cavity wall insulation uncovered inadequate inspections and poor advice. For this scheme to be a success, Green Deal assessors need to be held to the highest standards. £10,000 represents a major investment for most people, so the Government must ensure that the financing of the scheme is fair and good value for customers."

The £10,000 is not to be seen as a cap, however.

"Central to the scheme is the fact the repayments have to be lower than energy savings," said a DECC spokeswoman. "As long as the likely savings from a package of measures are more than the costs, the project will be financed. There is no cap."

This is great news for the most energy-inefficient buildings, for example in the rented sector, which could benefit from a host of much-needed measures.

The eligible measures

An industry-wide Call for Evidence and Literature Review on the costs and benefits of a range of measures was issued in March 2011, and the results are not yet in, so the published list is indicative only, but it includes the following:

• Heating, ventilation and air conditioning: Condensing boilers; Heating controls; Under-floor heating; Heat recovery systems; Mechanical ventilation (non-domestic); Flue gas recovery devices


• Building fabric: Cavity wall insulation; Loft insulation; Flat roof insulation; Internal wall insulation; External wall insulation; Draught proofing; Floor insulation; Heating system insulation (cylinder, pipes); Energy efficient glazing and doors


• Lighting: Lighting fittings; Lighting controls


• Water heating: Innovative hot water systems; Water efficient taps and showers


• Microgeneration: Ground and air source heat pumps; Solar thermal; Solar PV; Biomass boilers; Micro-CHP.

When making an inspection of a building, Green Deal Assessors will draw from this list of eligible measures to make property-specific recommendations.

The assessor will then work out whether the estimated annual saving is expected to be equal to or greater than the expected annual repayment costs. If it is, then the work can go ahead.

Certain measures could have an extra upfront subsidy - via the Energy Company Obligation. Alternatively a householder could choose to pay a top-up to bring down the repayment cost.

As an example, the documents cite that external wall insulation could pay for itself in 30 years based on an installation cost of £7,600. With a subsidy, the repayment period could be significantly reduced and brought within usual finance periods of 20 to 25 years.

The list has been welcomed by the industry. "It's encouraging to have as wide a list of technologies as possible included," said John Alker of the Green Building Council.

He added that as the scheme allows people to top up the Green Deal financing with their own money, and includes microgeneration technologies, this would encourage them to invest in upgrades.

Friends of the Earth's Dave Powell commented that adding microgeneration technologies to the Deal could make it more attractive, but it might reduce the amount of money available for insulation and draughtproofing, which is always more cost-effective.

The Government has realised that often it only makes sense to install a measure while other renovations are occurring, such as under-floor heating, or to add an additional measure to a package, such as installing heating controls when fitting an upgraded boiler. Further guidance will therefore detail the effects of sequencing.

It is not yet clear how, if the Green Deal will cover microgeneration, it will fit in with the Renewable Heat Incentive (RHI) - kicking in at the same time for domestic properties - and Feed-in Tariffs (FITs) for renewable electricity.

The Energy Company Obligation

The ECO will make sure that cases will still receive attention where the Golden Rule will not work but where energy efficiency improvements are needed.

For these cases, it will mandate energy service companies and utilities to meet the needs of the lower income and most vulnerable first, followed in priority by those properties needing the next most cost-effective measures that do not meet the Golden Rule for example, solid wall insulation (SWI).

This is intended to boost the supply chain for SWI, which is still relatively small, and bring prices down, which will help the measure meet the Golden Rule.

The ECO's funding 'pot' is expected to provide between £1bn and £2bn a year, but will inevitably result in higher general fuel prices.

ECO support is intended to be integrated into the Green Deal framework so that where they combine to deliver improvements, the consumer will just see one seamless package on offer from a Green Deal provider.

Suppliers and Green Deal providers will therefore need to work together to provide an offer to the consumer that comprises the optimum mix of support between Green Deal finance and ECO subsidy.

Community energy sees a new dawn in the UK

It's a historic week in Scotland where a new community wind power scheme will be commissioned by the end of the week, epitomising a wave of interest in community-led renewables.

The project is in Udny, Aberdeenshire and has been five years in development.

Whereas many so-called community wind farms in the country are actually developed commercially and the developers give a share of the profits to the local community, there are very few examples of real community-led schemes of the sort pioneered in Wales by Bro Ddyfi Renewables and others in WAles detailed in this recent Daily Telegraph article.

A Community Trust Company has been formed to disburse the profits from the 800kW Udny scheme - an impressive ｣4 million over 20 years - which could go to fund projects such as a new community hall, a youth hut, a cinema or the expansion of a local paths network.

“The project serves two villages," Matt Kaye, its Development Officer, explains. "It's been installed in the last month and will soon be producing enough electricity to power 500 households."

The development of the project illustrates how hard it has been for pioneers of community energy so far to get projects off the ground although it is becoming much easier.

"The idea was introduced to the community council, the equivalent of a parish council in England, five years ago by one individual," Matt continues. "A group of five people then applied for a bridging loan of ｣50,000 from Social Investment Scotland with which we set up a grid connection which then enabled us to proceed with planning and negotiations, and apply for further money.

"We got half a million pounds in grant funds from organisations such as Community Energy Scotland (CES) and the Big Lottery and Aberdeenshire Council, which helped us to do a feasibility study.

"We have set up two limited companies: one, the Udny Wind Turbine Company is designed to operate the wind turbine, the other disburses the profits."

They then hit a snag, which was that they had to pay back the whole of the ｣137,000 grant to CES when it was found that if they wanted to be eligible for feed in tariffs, under European State Aid rules they couldn't also benefit from the grant.

Eric Dodd, of Community Energy Scotland, said this would ruin most companies but because they had already spent the money and it had done its work, they were then able to get a favourable 100% bank loan on the basis of the guaranteed income from the feed in tariffs and with the help of CES.

Dodd says, "The CES is currently supporting over 150 community energy projects in Scotland. Most of these are wind projects but about 15% are hydropower."

He attributes the recent increase in interest in community energy to the fact that many communities have now seen them become a success elsewhere and start generating significant funding for local projects. They want to do the same themselves to help them become more sustainable.

Dodd says Community Energy Scotland advises on funding and grid connection issues as well as obtaining planning permission.

In the Western Isles, for example, 900 kW of wind power is being installed without the need for agreed interconnector to the mainland by identifying how the local distribution system can adapt.

Dodd advises that "communities should start with an idea of where they're going, but things can change along the way."

British Gas support for community energy

In an attempt to make community energy projects easier to get off the ground, this week British Gas has launched a special tariff designed to help fund such projects and a website on which they can find support.

Geard Lane, managing director of British Gas New Markets, says its EnergyShare scheme will guarantee paying ｣10 into a fund for every year that the customer stays on the tariff. It is being run in partnership with Hugh Fearnley-Whittingstall's River Cottage.

Individuals and communities register their projects on a website and consumers who are on the tariff will vote for projects they want to support.

British Gas has pump-primed the fund with ｣500,000. It has a target of reaching ｣15 million, which means signing up 290,000 customers.

Preapproved community projects will be able to bid for up to ｣100,000 each, and it could eventually fund about 150 projects.

British Gas claims that between 300 and 400 groups have already registered projects on the site although they won't all be seeking EnergyShare funding, as it is also intended to help share best practice.

"We're seeing a genuine groundswell of interest around the country from communities wanting to do their bit to tackle climate change - and their own fuel bills - by generating their own clean, green energy and reducing the amount of energy they use," Lane said.

GoodEnergy already offers customers 100 per cent green energy tariffs and supports community renewable heatA and electricity projects, welcomed the initiative. Its CEO, Juliet Davenport, described decentralised energy as "the key to unlocking the potential for renewables" in the UK.

The world must wean itself off coal or face catastrophe

News that climate-warming gas emissions are increasing faster than expected means that the world must put a stop to building new coal-fired power stations as soon as possible, in order to prevent future emissions being "locked in" for decades.

Greenhouse gas emissions reached a record high in 2010, said the International Energy Agency over the weekend, although their website provides few details at present.

The IEA's Dr Fatih Birol, Chief Economist at the IEA who oversees the annual World Energy Outlook, said that after a dip in 2009 caused by the global financial crisis, emissions are estimated to have climbed to a record 30.6 Gigatonnes (Gt), a 5% jump from the previous record year in 2008, when levels reached 29.3 Gt.

This means that it will now be extremely hard for the world to limit the projected future average global temperature rise to less than 2°C, the target agreed by global leaders at the UN climate change talks in Cancun in 2010.

For this target to be achieved, global energy-related emissions in 2020 must not be greater than 32 Gt. Therefore over the next ten years, emissions must rise less in total than they did between 2009 and 2010, a virtually impossible demand.

If true, this is very frightening. “Our latest estimates are another wake-up call,” said Dr Birol. “The world has edged incredibly close to the level of emissions that should not be reached until 2020 if the 2ºC target is to be attained. Given the shrinking room for manœuvre in 2020, unless bold and decisive decisions are made very soon, it will be extremely challenging to succeed in achieving this global goal agreed in Cancun.”

The IEA's report highlights current construction worldwide of fossil fuel burning plants as a major cause for concern, estimating that 80% of projected emissions from the power sector in 2020 are already locked in, as they will come from power plants that are currently in place or under construction today.

Coal is the biggest GHG emitter, globally; 44% of the estimated global CO2 emissions in 2010 came from coal, 36% from oil, and 20% from natural gas.

Paradoxically, with the German government now committed to abandoning nuclear power by 2021 - good news in one respect - there is a real danger that carbon emissions will increase in the short term.

Chancellor Merkel said on Monday that her country is still committed to its goal of reducing its carbon emissions by 20% of 1990 levels by 2020. But it has yet to set out how it can reconcile these two opposing policies.

It will be extremely demanding, involving substantial demand reductions through greater efficiency, while temporarily increasing emissions from fossil-fuel burning plants to make up the shortfall caused by the mothballed nuclear plants.

And unfortunately Germany is currently set to build 10 coal-fired power plants, which will lock in emissions for decades to come.

These new plants would emit 69.4Mt of C02 a year, over 25% of its electricity sector's 2008 total carbon dioxide emissions.

China, India, Poland and many other countries are also building new coal-fired power stations at an unprecedented rate.

If this trend continues, even a catastrophic three degree average global temperature rise may become inevitable.

It's imperative that the world agrees as soon as possible to leave coal in the ground, to stop burning it and oil for electricity, and to gradually wean itself off the most carbon-intensive forms of energy.

Why does this government spend less on the environment than culture, media and sport?

Here are some interesting facts about government spending.

The Department for Energy and Climate Change (DECC) is just about the smallest government department of all.

Its annual budget is £2.52 billion, but it has to spend 48% - £1.2bn - of that on nuclear decommissioning and nuclear waste management.

Therefore the amount of DECC's budget which it is able to spend on policy is a mere £1.32bn a year.

To put this in perspective, benefit spending in Great Britain is over 100 times more at £147.7 billion.

With 1% of the benefits budget, DECC's minister, Chris Huhne, is trying to save the planet and keep the lights on.

At the same time, DECC is hamstrung by the Treasury's Levy cap, which says that its approval is needed where policies could set a "potentially expensive precedent", amongst several other conditions.

The Department of the Environment Farming and Rural Affairs, DEFRA, is also one of the government's lowest spenders at just under £3 billion annually.

This means it receives less than consultancy Capita, the Government's favourite, single largest outsourcing firm (it received £3.3bn of contracts over the first five months of the Coalition Government alone).

Together, DECC and DEFRA's combined budget is less than that of the Department for Culture, Media and Sport's £6.97 billion.

Think about that: to this government, culture, media and sport is worth more than energy, environment and climate change.

Together, these departments are therefore pitching above their weight against the contrary inclinations of their main adversaries: the Treasury officials, with a budget of over £40 billion; and BIS, which has £26.25 billion to spend every year.

(Let's recall that the Treasury's last Budget was labeled the "blackest in living memory" by George Monbiot, and 79% of BusinessGreen website users agreed.)

In last year's Spending Review, Defra eagerly volunteered to deliver savings of £661m by 2015.

The budget for its arm's-length bodies was slashed by over 30% and led to the merging of WRAP and Envirowise with a 37.5% reduced budget and just 11 remaining ALBs.

WRAP and (DECC's arm's-length-body) the Carbon Trust are to have all their direct funding cut from April next year and have to bid competitively for contracts to do their work.

Is this the greenest government ever?

Intermittency of wind and solar not a problem - IEA

Intermittency of supply is a common criticism of some renewable sources of energy, specifically wind and solar.

But a new book from the International Energy Agency (IEA), Harnessing Variable Renewables: a Guide to the Balancing Challenge shows that there is a greater technical potential for balancing variable renewable energy output than is usually assumed.

It calculates the ability of eight regions to balance large shares of variable renewable energy:

• The British Isles (Great Britain and Ireland together): 31%
• Denmark: 63%
• the Nordic Power Market (Denmark, Finland, Norway and Sweden): 48%
• the Western Interconnection of the United States: 45%
• the New Brunswick System Operator in Eastern Canada: 37%
• Mexico, 29%
• the Iberian Peninsula (Spain and Portugal together): 27%
• Japan: 19%.

The book does this with a four-step Flexibility Assessment (FAST) method for assessing existing flexible resources, which can then be used to balance increasingly variable supply and demand:

1. assess the ability of the different flexible resources to change their production or consumption
2. examine the aspects of the power system that will constrain them from doing so
3. calculate the maximum requirement for flexibility of a given system resulting from fluctuating demand and output from wind plants and the like
4. identify how much more variability can be balanced with existing flexible resources.

“While some areas are clearly more flexible than others, all power areas assessed show that greater technical potential for balancing variable renewable energy output exists than is commonly supposed,” said Richard Jones, the IEA Deputy Executive Director, when launching the book at EREC 2011, Europe’s Renewable Energy Policy Conference, on 24 May in Brussels.

“The results from these case studies demonstrate that variability needs not be an impediment to deployment,” he continued. “As long as power systems and markets are properly configured so they can get the best use of their flexible resources, large shares of variable renewables are entirely feasible from the balancing perspective.”

Smart grids will cut carbon emissions by over 50%

The coming conversion of the world's electricity networks to the so-called 'smart grid' (I don't think it means it becomes self-aware - at least I hope not) will cause the grid to decarbonise itself by over 50% in America.

The exact amount elsewhere will depend on many other factors, but be at least as great. This is good news for efforts to fight climate change.

The figure is in a study from the Electric Power Research Institute (EPRI) published last week. It suggests that by enabling greater integration of renewable technologies, as well as reducing consumption, the smart grid could cut US 2030 carbon emissions by a staggering 58%, against a 2005 baseline.

Over here, the EU could be powered almost entirely by renewable energies in 2050 without power disruptions by using smart grids and building new cross-border connections, according to a study by Greenpeace and the European Renewable Energy Council (EREC).

It's big business

This is going to mean very big business indeed.

Last week General Electric announced it is buying a small Irish smart grid company FMC-Tech in just one example of an intense level of business activity that is set to increase over the coming decade as the smart grid really begins to take off.

GE is acquiring the company to give it expertise in distribution automation - FMC-Tech has developed a suite of services for automating management of power distribution from the substation to the customersmeter.

The EPRI report also says that over 20 years the investment required to create the smart grid may be up to $476 billion in the US alone - that's $17 billion to $24 billion a year.

But the benefits to society will far outweigh the costs - up to $2.028 billion, EPRI says. In Britain, the savings to consumers are calculated at £7.3 billion.

The savings come because smart grid technologies will reduce the annual growth in electricity consumption to less than 0.7% over the 2008-2035 period, below the 1% projected by the US Department of Energy's 2010 energy outlook.

Put another way, if we do not smarten the grid, the average electricity bill will probably rise by 400% over the next 20 years; if we do, the increase will be only around 50%, according to Clark Gellings, EPRI fellow.

By using smart grids, utilities will also be able to lower the system voltage level and make meter-reading redundant, argues Chris King, chief regulatory officer at smart grid software provider eMeter.

Ian Marchant, chief executive of Scottish and Southern Energy, has put the cost of a European smart grid at over £150 billion and proposed that funding come from growing European pension investments. After deducting necessary costs like the installation of smart meters and new software, the net benefit to Europe would still be Euros 31 billion per year, King said.

Speaking to an IT Forum last Wednesday GE Energy Services chief technical officer Eric Gebhardt explained how his company is making "the journey to a smart energy ecosystem.”

As more renewable energy sources such as solar and wind are plugged into the power grid, their intermittent nature is forcing IT operations to change, he said.

“Infrastructure in place today has reached the end of its design life,he added. 鼎ustomers are looking to operating longer and longer with the same equipment while changing operating modes.”

General Electric's view

So General Electric is buying FMC-Tech because its technology, by providing real-time data about conditions on the grid, is able to control energy management and demand and outage management systems.

This will give much cheaper load balancing for utilities, recuing demand and managing distributed supply. FMC describes its services as "a system that delivers dramatically improved network performance at lower cost. The system consists of sensors fitted on cables throughout the network, both overhead and underground, measuring current and conductor temperature.

"Local controllers (X-NET) gather this information and deliver to a web-controller via GPRS. The overhead sensors are line powered, and the X-NET Controller can be powered by a low voltage supply or a solar panel. The system provides a platform for continuous network improvement through the application of new and enhanced software development."

General Electric's Bob Gilligan, vice president of transmission and distribution, has said that GE is developing compatible household appliances such as refrigerators that could reduce their energy use by about 25% by adjusting the timing of their automatic defrost.

He also said that the key issue for smart grids is that they will have to accommodate the gradual introduction of millions of electric cars, which will be able to store energy and also release it back when required from their batteries.

Successful smart grid trial

Practical results on developing the smart grid have come from a trial involving 25 Dutch households in the Hoogkerk district of the City of Groningen, called PowerMatching City, showing t it is possible to create a smart grid with a corresponding market model using existing technologies.

This is the first time in Europe that the results of a live smart grid community have been researched at this technological scale.

The pilot's aims were energy optimisation for the end user, reducing the grid load for the network operator, and reducing imbalances for the utility. A second phase will concentrate on the system integration into market processes like billing, charging electric transport and congestion management at the district transformer.

The underlying coordinating mechanism in PowerMatching City is PowerMatcher, a software tool that balances energy demand and energy supply.

AlertMe

In another indication of the scale of developments, energy and home management company AlertMe, which signed a £20 million deal with British Gas last year, is completing trials in many different countries including Germany, Spain, the Netherlands, Brazil, the US, Portugal and Mexico, and is looking for partners in other countries.

Its CEO, significantly, used to be head of broadband firm Tiscali, signalling how the convergence of software developers, telecommunications industry and energy that is the hallmark of the smart grid.

Mary Turner appointed a new chairman earlier this month, Ron Mackintosh, who was CEO of Computer Science Corporation's European business.

The company has a smartphone app that allows users to control their domestic appliances. This is likely to become commonplace as part of the smart grid revolution.

Some are still sceptical that consumers will be interested in managing their domestic energy in this way.

Others respond that they said the same thing about personal computers back in the 1970s who would want one?

Now, almost everyone has one.

PV will be as cheap as grid electricity by 2015 in southern UK

The growing maturity of the renewables industry is indicated in a taster for an imminent report from the Intergovernmental Panel on Climate Change (IPCC) which looks at the growing deployment of different technologies and urges the continuation of stable policies to support changes in the energy system.

Speaking about the report, one of its authors, Sven Teske, predicts that parity for photovoltaics will occur by 2017. That is the point at which solar electricity is the same price as conventional electricity.

Prices have been coming down very fast recently, as the following table shows:

Module pricing per peak watt	unit	June 2010	May 2011	% reduction in 11 months
Europe	€/watt	4.13	2.69	65%
US	$/watt	4.23	3.07	73%
Lowest mono-crystalline module price	$/Wp	2.23	1.8	81%
	€/Wp	1.65	1.21	73%
Lowest multi-crystalline module price	$/Wp	1.74	1.84	106%
	€/Wp	1.29	1.23	95%
Lowest thin-film module price	$/Wp	1.76	1.37	78%
	€/Wp	1.3	0.92	71%

[source: solarbuzz.com]

Some countries - Spain, Italy, France and Germany - will reach grid parity by 2015. As for Britain, he predicts that this will occur in the southern part of the UK too, because it receives as much sunshine as the north of Germany.

But it won't happen in Scotland or Bulgaria, for example; in the first case there is not enough sunshine, and in the second case the price and the consumer reach is too low.

But Teske warns “if the PV industry wants to achieve a larger market penetration they need to be involved in storage, peak demand delivery and development of the smart grid".

Teske cautions that the renewable industry must watch out for very aggressive lobbying from nuclear power, gas and shale gas. He says, "in Spain, the gas lobby went straight for the renewables industry," and this may be partly why the feed in tariff for solar in that country was suddenly withdrawn with disastrous consequences.

Above all, a secure and lasting policy landscape is what is required.

Teske also says that the situation regarding concentrated solar power is fascinating. "If you added up all the announcements of concentrated solar power projects in Egypt, they would have 120% renewables already. What really counts are connected systems – not announcements – and there have been relatively few of those yet."

The Desertec project remains highly optimistic that it can find investors despite the political uncertainty in north Africa.

Turkey is another country that is, perhaps surprisingly, forging ahead with renewable energy with a new 100MW solar plant and with the intention of powering Antalya completely by solar power, and very good wind resources.

OECD says cut fossil fuel subsidies to create 20 million jobs

The “Green Growth Strategy” report from the Organisation for Economic Co-operation and Development (OECD) argues, amongst other things, for a decrease in the carbon dioxide emission intensity of production, and a decrease in subsidies for fossil fuels.

It says that investing in green activities will create many jobs – up to 20 million worldwide by 2030 - in renewable energy generation and distribution alone.

There will be job losses associated with the more polluting energy sources, but these are “likely to be concentrated on a small portion of the total workforce".

The OECD makes the interesting observation that although “the most intensely polluting industries account for a large share of total dioxide emissions, they account for only a small share of total employment" - 80% of emissions but only 8% of the workforce in 2004, the most recent year for which data are available.

It says, possibly with a nod to the most recalcitrant nations in climate change negotiations, that “there is a widespread perception that some people will be worse off because of green growth policies. While this is not the case, unless these concerns are addressed, some key policies may be called into question."

The dilemma for governments is that the damage caused by higher fuel prices will be immediately felt by some people, but the economic and environmental gains of switching to the low carbon economy take longer to materialise and are more diffuse.

Therefore “targeted compensatory measures need to be introduced, particularly in emerging markets".

Consequently, the report concludes that “if governments wish to green the growth paths of their economies they need to treat the challenges as ones that go to the core of their economic strategies."

Complementary to this report for policymakers is a diagnostic framework and a toolkit, Tools for Delivering on Green Growth, and the OECD will follow up the report with a long-term agenda to support national and international efforts to achieve greener growth, and an ongoing discussion forum.

Solar PV and marine energy may be avoided by Green Investment Bank

Marine energy developers will have to wait until after 2015 before they can take advantage of finance from the Green Investment Bank, and solar power developers are currently confused about whether they will be able to use it at all.

The Department of Business, Innovation and Skills (BIS) has released a progress report on the principles under which the bank will be able to lend, citing a wide range of sectors including especially offshore wind, non-domestic energy efficiency and waste, but not mentioning solar PV.

The priorities are still being worked out, including whether domestic energy efficiency measures under the Green Deal will be eligible, since the Government wishes this to be primarily a private-sector led scheme.

But reading between the lines, it seems that the bank will be cautious, not proactive, in its lending, regarding itself not as a source of capital funding for projects whose profitability is some way into the future, but as venture capital for market-ready technologies.

BIS’s Vince Cable has been in disagreement with Chris Huhne at DECC over what the bank should finance, with Huhne arguing that horizon technologies such as marine and anaerobic digestion should be favoured.

It seems that Cable has largely won this tussle, especially since BIC will be the only shareholder of the bank - leaving DECC out of the picture in decisions over what will be financed.

Various groups immediately criticised this narrow remit, expressing, like regional renewable energy trade body Regen SW, that “for the bank to be truly effective it's important it doesn't take the simple option of investing in safe projects that would simply compete with bank finance."

Its chief executive Merlin Hyman added, "It must focus on leveraging the required private capital by financing commercially-viable projects at the earliest stages, where the highest risks are inherent."

Manufacturers’ organisation EEF demanded more detail on the type of projects that would be eligible for funding from the bank. Tony Sarginson, its North-east regional manager, said: “The big question of what will be its funding priorities is yet to be answered."

But BIS says the bank's operating principles will include making a significant environmental impact as well as financial returns; operational independence from Government; partnership with the private sector, and the minimisation of market distortions.

The bank will evolve as follows: from April next year, subject to state aid approval, the Government will be able to make direct financial investments is self to priority projects. After this, when the bank is a stand-alone institution, it will lend according to the criteria in the document published by BIS this week.

Following April 2015, it will be able to borrow money, assuming public sector net debt is falling as a percentage of GDP, and therefore radically increase its activity. But what if it is not?

Wind power, particularly offshore wind, nuclear, transmission networks, energy efficiency and waste are cited as being particularly urgent, although nuclear is not seen as particularly relevant to the remit of the bank, whereas the provision of rolling stock and marine energy are.

If the bank does lend to nuclear operators then a close watch has to be kept that there are no further liabilities for taxpayers.

In the area of waste management, novel technologies such as anaerobic digestion could be an opportunity for the bank.

BIS does to its credit point up the importance of energy efficiency, saying “many users are unaware of the potential savings or how to capture them and therefore invest less than the optimal amount in upgrades or building fabric, fittings, plant and machinery", so sees a role for the bank in promoting this.

Air and sea transport must start trading carbon

European finance ministers meeting in Brussels yesterday called for international shipping and aviation greenhouse gas emissions to be included in a global carbon pricing system.

In a decision immediately hailed by Oxfam's climate change adviser Lies Craeynest as a ″double win", they said that this would become ″potential source of revenues that would also generate the price signal necessary to efficiently achieve emission reductions from these sectors".

The EU is already resolute that aviation will be included in its Emissions Trading Scheme after 2012, despite opposition registered by at least 120 countries at an International Civil Aviation Organisation (ICAO) meeting last October.

The finance ministers issued a statement on climate finance which said that although raising the $100 billion per year by 2020 to tackle climate change - as agreed by world leaders in Copenhagen 2009 - is challenging, it is feasible.

They noted that Euros 7.2 billion will be available up to the end of 2012 in Europe, and challenged other countries to come up with their share of the cash.

One of the mechanisms for raising this cash must be a ″robust carbon market" to drive ″the carbon price necessary for low carbon investment to achieve global mitigation objectives in an efficient way".

They acknowledged that public finance is a particularly important source for developing countries striving to meet their reduction targets, that is difficult to provide in the current economic climate.

It says therefore that ″the carbon pricing of global aviation and maritime transportation is a potential source of revenues that would also generate the price signal necessary to efficiently achieve emission reductions from these sectors".

The International Maritime Organisation (IMO) and ICAO must therefore "develop without delay a global policy framework that avoids competitive distortions or carbon leakage".

However the statement also squarely challenges developing countries to develop "improved general business and policy frameworks". If these are in place it will inspire confidence for cooperation between public and private climate financiers and the development of ″an effective and efficient Green Climate Fund", as proposed by the UNFCC and delegates at Cancun last December, and currently being designed.

The system finance ministers are proposing would work by imposing a global cap on carbon dioxide-equivalent emissions. Companies that then emitted more than their share of the gases would have to trade permits.

"It is a unique opportunity to control a major and rising source of climate changing emissions and at the same time generate desperately needed cash," said Oxfam's Craeynest.

Shipping companies - close to agreement?

The IMO was tasked with the job of reducing emissions from shipping in 1997 and has so far failed to come up with a solution.

On April 27 this year, Climate Action Commissioner Connie Hedegaard signalled that she had lost patience with them.

In response, a spokesperson for the IMO argued that ″the work is heavily advanced", and promised it will be discussed further at the next meeting of the group's Marine Environment Protection Committee during 4-15 July.

This body's meetings occur but twice a year. At the last one, there was no consensus reached on how to proceed with the next stage of its climate change strategy, but delegates did decide to force new ships to include an Energy Efficiency Design Index (EEDI) and a Ship Energy Efficiency Management Plan (SEEMP), and that as long as the required energy-efficiency level is attained, ship designers and builders can be free to use the most cost-efficient solutions for the ship. This is a strategy that is compatible with a carbon pricing system.

It also decided to task a Working Group on GHG Emissions with preparing details of a carbon trading system. At the end of March, this Group came up with a variety of proposals, ranging from a contribution or levy on all CO2 emissions from international shipping; or only from those ships not meeting the requirements of the EEDI, via emission trading systems; to schemes based on a ship's actual efficiency, both by design and operation, based on the SEEMP.

It's these that will be discussed at the July meeting, and the European finance ministers will be hoping that at last, after 14 years of deliberation, the IMO will finally reach a consensus.

Airlines resist change

The ICAO has also been looking at the issue for a long time since 2000 - and is also considering market-based mechanisms. This is the body tasked by the Kyodo Protocol with working with developing countries to reduce emissions from international aviation.

It has issued draft guidance on the voluntary use of emissions trading and on levies, but it has consistently resisted taxes of any sort on aviation fuel.

Last October all member nations committed to increasing fuel efficiency by 2% a year up to 2020; to achieving carbon neutrality for the industry by 2020; and to producing international standards for aeroplane engine emissions by 2013. But these are general goals with no specific requirements for individual member nations. There is no forum for discussing such requirements until the ICAO's next session - in 2013.

Biofuels are considered to be the only viable option for reducing aircraft emissions, and several companies are successfully trialling various fuels.

Air travel is responsible for some 700 million tonnes of carbon emissions each year (around half of which comes from international aviation), representing 2.4% of the world's total emissions. It is highly debatable whether all such journeys could be propelled by renewable fuels.

It's clear that Europe believes that a global carbon pricing scheme is the only mechanism which will deliver the emission savings required and this is why it is is piling the pressure on to these two crucial industries.

Huhne's victory is a real cause for celebration

I woke up this morning realising the full significance of the announcement made by Chris Huhne yesterday in the House of Commons.

In the future, the decision he gave could well be looked back upon as the single most decisive moment which set this country on course to become the leading low carbon nation in the world, providing the impetus for a drastic and fundamental transformation of the United Kingdom's infrastructure, economic renaissance and recovery. Translation: millions of jobs.

The decision to implement in full (although we still don't know about the inclusion of shipping and air travel, and although it is dependent on European progress as a whole) the recommendations of the Committee for Climate Change for the years 2023 to 2027 sounds arcane and far off.

But the chorus of approval from many quarters with which the decision was met betrays its importance. Given the noises that beforehand were coming out of The Treasury and Department for Business, Innovation and Skills (BIS), I would not have put money on Huhne and Cameron adopting the CCC's advice without significant changes.

The decision is so important because it provides the long term certainty for which the sector has been clamouring.

Now, investors know that they can put money into developing the smart grid, into offshore wind farms, turbine and PV factories, marine power, carbon capture and storage, building and renovating zero carbon structures, and even nuclear power - without fear that the policy landscape will shift and other sources of energy will become more attractive.

Previously unthought-of innovations like this amazing tidal energy installation in the Thames will become commonplace.

But will it happen to a sufficient extent and fast enough?

This single act alone does not make the Cameron-Clegg Coalition “the greenest government ever". After all, most of the activity that will flow from the new targets, once they are enshrined in law, will only happen after this Government's term of office is over.

The Coalition has done - and is doing - many other things to weaken investor confidence in renewable energy.

Its Green Investment Bank will start up with insufficient capitalisation and no initial borrowing capacity, due to Treasury over-caution. As Green MP Caroline Lucas has pointed out, rather than unlocking the £450bn in finance for renewable energy and the low carbon infrastructure needed in the next 15 years, the bank's impact will, initially at least, be limited to its original £3bn funding.

It has left open the door for the purchasing of carbon credits to allow us to meet our national greenhouse gas emission-reduction targets.

It has signalled that it will review the carbon budgets in 2014, which means that the commitments could be backtracked upon.

It is likely to ignore the CCC's advice that it should increase the targets for 2013-2023 in line with the level of actual emissions.

It has damaged the confidence of the U.K.'s solar PV industry by its U-turn on feed in tariffs for installations over 50 kW.

Its Localism Bill is providing no confidence that renewable energy developments will not be blocked on flimsy grounds by NIMBYs.

DECC's Energy Bill and the proposals for Electricity Market Reform have also come under severe criticism.

And, the renewable energy industry is concerned about the Treasury's attempts to control DECC's spending through its Levy cap on the Department.

This is "part of the Treasury's efforts to reclassify renewable obligation certificates and feed-in tariffs as public spending that it can then control," according to one unnamed source.

The cap currently covers the Renewables Obligation, Feed-In Tariffs and Warm Home Discount, which the independent Office of National Statistics has classified as "taxation and spending" and must therefore be overseen by the Treasury. The Renewable Heat Incentive comes out of general taxation and is subject to other constraints.

The planned electricity market reforms could also be covered by this agreement. This all gives the Treasury significant control over DECC policies.

The document, while ostensibly saying that DECC retains the right to change policies, decrees that Treasury approval is needed where policies "could create pressures leading to a breach" of the cap; could "increase long-term cost pressures beyond those previously envisaged"; and could set a "potentially expensive precedent".

The Treasury must also approve any policy changes that are "novel or contentious".

DECC itself says that "where a policy is forecast to overspend against the envelope, DECC will have to develop plans to bring spend back within the cap".

Given all of this, it is almost a miracle that Chris Huhne managed to get what he wanted regarding the fourth carbon budget. That he did is probably because there are no spending commitments in this government term attached to it.

If he had failed, it would have exposed him as a very weak minister indeed.

He now needs to redouble his efforts to reclaim control over his own department's policies in order to keep his authority.

Still, as Jeremy Leggett, CEO of Solar Century observed yesterday, the UK has now embarked on a radical and trail-blazing trajectory, the full consequences of which it probably has little idea. We know where we're going - 80% with emission cuts by 2050, 50% by 2030 - but we don't know how we're going to get there.

It's going to be a rocky, exciting, and highly rewarding ride.

Government's electricity market reforms are 'half baked'

The Government's proposals for reforming the electricity market have come under a hail of attack for being short on detail and plain wrong in other areas, as well as opening a back door for subsidising nuclear power.

According to a committee of MPs, there is a gaping hole in the Government ambitions to reform the electricity market - set out in a consultation which closed on March 10 and which is awaiting Government response - and that is an absence of a plan for the wholesale market.

The wholesale market ″would not be changed by the measures proposed", says the Select Committee on Energy and Climate Change in their review of the Government's proposals.

“The consultation document proposes a number of "bolt on" measures that reform the subsidies and structures around the market, not the market itself", they continue.

The market dominance of the Big Six energy companies must be broken up they say, "in order to allow new entrants to invest in the UK's low-carbon future". Currently, they are almost unchallenged in the sector as they control both generation and supply, therefore there is little room for independent or decentralised generation.

“This lack of liquidity in the market makes it hard for potential investors" and new entrants, says the review.

The MPs also say that "the Government's 'one size fits all' approach will fail to bring forward the low-carbon investment we need".

Some generators such as nuclear and biomass which can provide continuous power will benefit from the kind of contracts proposed, but for intermittent generators such as wind and solar, and technologies like carbon capture and storage and electricity storage itself, the contracts are inappropriate.

Support for nuclear power

It says that the proposed Feed-in Tariff with Contract for Difference is fine to expedite an extremely rapid rollout of nuclear power, "if that is the option the Government wishes to pursue," but MPs suggest other kinds of long term contract should be designed as well for other kinds of low carbon generation.

These contracts give a guaranteed price for generating electricity from nuclear power over the long-term in order to help finance the construction of the plans. However, this effectively amounts to a subsidy which is given to nuclear, whereas the Government is ostensibly opposed to such subsidy.

"Ministers ... don't want to own up to supporting [nuclear power]," said Committee chairman Tim Yeo. "This is understandable given the promise they made not to subsidise nuclear, but it would be deeply irresponsible to skew the whole process of electricity market reform simply to save face."

As a result, the government should immediately put together an independent team of experts to develop alternative financial incentives for all low carbon energy generators.

Juliet Davenport, CEO of Good Energy, a generator and supplier of renewable energy, welcomed this recommendation. "It is important that the Government creates a truly level playing field so that renewable energy doesn't miss out because of hidden subsidies for other technologies," she said.

Energy efficiency is overlooked

The committee has other criticisms of the proposals.

There is not enough focus on energy efficiency in the review. "Demand reduction ought to be a primary focus of the Government's decarbonisation agenda, as the most cost-effective and environmentally effective method of climate change mitigation."

It "should be placed at the heart of EMR and the Government's climate change policy".

DECC proposes a carbon intensity of 100g CO2/kWh for electricity generation by 2030, compared to the present 490g CO2/kWh. But MPs say instead they should accept the recommendations of the Committee on Climate Change and let the electricity market review aim to achieve 40-60gCO2/kWh by 2030.

The level of the Carbon Price Floor is crucial to the success of the reforms. MPs criticise the Treasury for introducing the price in this year's Budget ahead of the review of market reform. The floor will start at around ｣16 per tonne of carbon dioxide in 2009 prices (equivalent to ｣19.16 in 2013-14 estimated prices) and follow a linear path to ｣30 per tonne in 2020 (in 2009 prices).

"We would have preferred the government to establish a nominal Carbon Price Support level until 2018 and then set a long-term trajectory based on advice from the Committee on Climate Change," the report says. "Until then, the Carbon Price Support represents little more than an additional energy tax, which will be passed on to consumers."

Furthermore, proposals for an Emissions Performance Standard (EPS) are ″half baked" say the MPs. "The EPS proposed in the consultation document would have no material impact and is therefore pointless. The prospect that the EPS will be tightened by unannounced amounts later on introduces additional political risk."

The caveat that the EPS could be changed later if it is not working just introduces more uncertainty into an already highly uncertain investment world, they say.

The Government also has a duty to explain to the public what the costs of decarbonisation are and how they will be met. To be sustainable the reforms must have public support.

More detail is also called for in other areas, such as interconnection, carbon price trajectories, the contribution of decentralised generation, technological improvements, the pace of electrification in the domestic heating and transport sectors, and what happens if the price of gas falls.

A target timetable for implementation must be published as soon as possible, once the details are right, to reduce the uncertainty that is deterring investment.

Electricity market reform must also be coordinated with other developments, such as the Energy 2050 strategy in Europe and the transmission pricing review.

This topic is too important to get wrong, they conclude. Without the ｣110 million of investment necessary in the electricity sector in less than 10 years, the UK will not meet its decarbonisation and energy security targets.

Cameron must listen to business and implement the 4th carbon budget

David Cameron must announce on Monday that he is accepting the fourth carbon budget for the period 2023-2027 published by the independent Committee for Climate Change last December.

The Cabinet is split on the affair. Even the Liberal Democrats are divided, with business secretary Vince Cable seeking a watered-down version while energy and climate minister Chris Huhne is recommending full acceptance.

Labour leader Ed Miliband has written to Cameron with the support of Huhne's shadow, Meg Hillier, challenging him to accept the budget.

If he doesn't, it will be the first time that the Government has not accepted the CCC's recommendations.

The fourth budget limits emissions over the period to 1950 MtCO2e, which will attain an emissions cut 50% below 1990 levels in 2025 and 60% by 2030.

The budget says that it "represents our assessment of a minimum UK contribution likely to be appropriate to a future global deal covering the 2020s".

In a leaked letter, Cable writes about his concerns that the level of abatement "may not be technically feasible" and is "not cost-effective", because it assumes that a future EU-ETS cap consistent with a 30% emissions reduction target by 2020 is set.

However, as I reported last month, this level is not far off in any case.

Cable would like to set a level instead of 2170 MTCO2e, but is prepared to accept a compromise, of CCC's recommendation for the non-traded sector. He claims that this can allow the Cabinet to claim that the Coalition is "The Greenest Government Ever" [sic].

In his letter, Ed Miliband says that for Cameron to do anything other than accept the CCC's recommendations would be to abandon the cross-party support that has so far characterised action on climate change.

He says it did appear "that on this crucial issue for the future of the planet which our children will one day inherit, there was broad cross-party consensus".

Not to cut emissions at a rate that "independent experts say is necessary to prevent dangerous climate change would send a terrible signal to business and to the rest of the world", he adds.

One thing is absolutely certain: the Government has been inundated with requests from business for a clear set of policies into the future, to give reassurance to investors in financing the low carbon industrial revolution that can let Britain lead the way.

Two weeks ago even the CBI told the Government that "low-carbon investment is vital for the UK", that "the pace and scale of investment is a barrier to success" and "Government must take action to set the right investment conditions".

Amongst those who have cried out for this assurance you can find John Lewis, Unilever, Shell, water and energy companies and many more.

This week Danish wind turbine manufacturer Vestas offered to set up an offshore manufacturing base in Sheerness, Kent. Vestas, but only if the UK Government delivers "stability in the market and long term political and regulatory certainty.”

Maria McCaffery, Chief Executive of RenewableUK, agrees: "We have an unprecedented situation where some of the best known companies in the world are literally queuing up to invest in the UK. The Government now needs to seal the deal on offshore: it needs to bag the first 8,000 jobs and hundreds of millions of pounds already pledged, by firmly supporting the technology.”

Even Foreign Secretary William Hague is in favour of accepting the budget. In another leaked letter sent last month to the Prime Minister, he wrote, "I agree that we should not reject the fourth carbon budget recommended by the Committee on Climate Change in order to retain public support for our climate policy at home we need to be able to point to similar effort abroad. If our domestic resolve is seen to be weakening, we will lose traction elsewhere."

This week CCC chair Lord Turner met Vince Cable in an attempt to persuade him to change tack, and to show agreement with Cable's concerns about cost effectiveness even made a concession, in saying that offshore wind targets could be changed because more onshore wind would be more cost-effective.

This is a key test of the Government's commitment to tackling climate change and to the low carbon revolution which can create so many jobs in this country.

In opposition, Cameron argued that an independent body was necessary to set and enforce emission targets, and ministers shouldn't be able to change them.

With so many voices in support, it is vital that David Cameron remains firm as a champion of this sector, the only sector that has a chance of leading the country out of the economic doldrums in which it remains stuck.

US nuclear reactor safety is "full of inadequacies and errors"

A new report on US nuclear reactor safety highlights a catalogue of errors and oversights.

The report, “Fukushima Fallout: Regulatory Loopholes at U.S. Nuclear Power Plants”, is a summary of Nuclear Regulatory Commission (NRC) regulatory inadequacies, practices and decisions that impair effective nuclear safety oversight in the United States.

• Widespread malfunctions and inoperability of emergency diesel generators at nuclear power plants
• The absence of emergency back-up power requirements at some spent fuel pools
• The absence of requirements to prevent hydrogen explosions at reactors and spent fuel pools
• Outdated seismic safety requirements, even as applications for new licenses and license extensions for many nuclear reactors continue to be processed by the NRC.

The report has been prepared by the office of Congressman Edward J. Markey (D-Mass.), a senior member of the Energy and Commerce Committee and top Democrat on the House Natural Resources Committee.

“It is apparent that many of the failures of the reactor cooling systems and measures to prevent explosions that led to the meltdowns in Japan could also occur in the United States, and would not even be violations of current regulations,” said Rep. Markey.

“This is unacceptable, and I believe that the NRC must halt its processing of all pending nuclear reactor licensing applications until these vulnerabilities are fully remedied.”

The report concludes that: “An examination of NRC regulations demonstrates that flawed assumptions and under-estimation of safety risks are currently an inherent part of the NRC regulatory program, due to a long history of decisions made by prior Commissions or by the NRC staff that have all too often acquiesced to industry requests for a weakening of safety standards.

"Coupled with reports that the near-term inspections being conducted at United States nuclear power plants may be limited in scope and subject to restrictions on public disclosure, it would be unwise to move forward with any pending licensing actions before the NRC fully completes its review and upgrades its safety requirements.”

A copy of the full report can be found HERE.

Energy Bill will fail to deliver Green Deal - MPs

The Government's Energy Bill came under attack at its second reading in the House of Commons on Tuesday for being great on rhetoric but short on the kind of detail which will get the job done on time.

Fifty pieces of secondary legislation are expected to provide the detail needed, MPs said, which is currently missing in the draft and will delay its implementation.

The Bill, which contains measures to introduce the Green Deal, offshore oil and gas and energy reform, nuclear power and more, has strong cross-party support in principle.

Chris Huhne called the Green Deal - the centrepiece of the Bill but not now due to be introduced until October 2012 - ″the most comprehensive energy saving plan in the world".

The UK has oldest and least efficient buildings in Europe and they are responsible for 27% percent of the country's greenhouse gas emissions.

Huhne said that so far energy efficiency has passed under the radar, resulting in ｣2-｣3 billion being wasted every year. "That is gas and oil imports, so the Bill is good for energy security as well."

For the first time, Huhne put a figure on the amount that could be offered under the Green Deal - up to ｣10,000. He said that British Gas pilot schemes have shown that householders who do take the measures can cut bills by up to 45% or save ｣400 a year.

"Homes and businesses will be included," he said, ″backed up with a watertight legal framework. Householders will pay nothing up front. It will be paid for by savings on the bills. The energy suppliers must support consumers in doing this.

The private rented sector is the hardest to change. But Huhne said that with the Green Deal, "landlords will face no upfront costs and their properties will be improved. They have welcomed the Bill. From 2016 any tenant asking for landlord's consent to make a reasonable improvement in energy efficiency cannot be refused."

From 2018 renting of the very worst homes with an energy rating of E or F will be banned. 680,000 homes will be affected by this.

But, as Alan Whitehead, the Labour MP for Southampton, pointed out, the landlords register has been abolished by the Government, which could have helped them to monitor the sector.

All councils will play a role in delivery of the programme and the Local Government Association and DECC have an Memorandum of Agreement on the subject recently.

Huhne said that he wants to see the maximum possible range of measures included in the Bill.

The success of the Green Deal will depend upon how it works in the new market that will be created in energy savings. Huhne asserted that "The City is practically chomping at the bit to help finance the Green Deal", and cited the fact that Eaga has gone to the market already to secure bonds. "The securitisation market is opening up," he said.

The interest rate level will be key

But speaker after speaker said that success will really depend upon how low the interest rate offered will be. This figure is not in the current draft legislation, although Huhne mentioned 8-10% over 25 years.

Former Environment Secretary Michael Meacher said that the precise rate "is the fundamental issue - without a low interest rate, the Bill won't succeed as householders will be worse off than they are now.

"The WWF estimates that at 8-10% over 25 years then the likely effect of the Bill will be minimal," he said. ″Even if it is 6% only 1 in 14 households will take up the offer. The fuel poor certainly won't take it up. Why can't the energy suppliers meet the cost of helping the fuel poor in this case?"

Green MP Caroline Lucas took up this point, observing that not even Germany could obtain the level of refurbishment required, of over 4,000 houses a day. There they only manage 100,000 homes a year even with a Government-supported 2.6% interest rate.

"Besides," she added ″It is a whole house refit that is required to reach 80% reductions not a minimum level of refurbishment". At this rate, Government targets will be missed by a factor of 100.

Then there is the problem of competition. In the Warm Front scheme large companies hoovered up much of the work but smaller companies can often do it more cheaply. But Huhne promised the Green Deal will be open to small companies as well as large.

Huhne said that the legislation will create thousands of jobs. "The number of jobs will vary by area, but nationally is estimated at around 27k-100k by 2015 in insulation alone - there will also be unskilled jobs in the supply line." Costs will come because of the scale of the Green Deal.

More detail needed

The Shadow Secretary of State for Energy and Climate Change, Meg Hillier, called the Bill "a flaccid lettuce leaf, laden with missed opportunities", and promised in committee stage to seek to improve it.

She said that there have been no evidence sessions on the Bill, as is normal with the progression of a bill through parliament. "There are 27 million homes - how can all of them be tackled in the time available?"

"Why has the Government commitment to zero carbon homes ended?" she asked. ″Why won't the Green Investment Bank be up and running for two more years? This is a dog's breakfast of a Bill. We want it to succeed, but we need more detail. Climate change is too big to leave to the market."

Michael Meacher also criticised the Bill for using assumptions provided by energy companies of the level of energy supply in the future and then presuming measures to reduce it. "This is putting cart before the horse," he said, ″as it would make sense to assume that due to energy efficiency there will be a reduced level and then make measures to reduce that.

"Why is there no proper assessment of energy demand?" he demanded. "The power generators obviously want to sell more energy."

Iain Wright, the MP for Hartlepool, an area which hopes to benefit greatly from the green industrial revolution, lamented the pace at which the government expects to proceed.

He pointed out that the UK has already fallen from 3rd to 13th place in global ranking in this area and complained of rhetoric that is not backed up by certainty and commitment affecting investment.

Will ECO be capped?

The Energy Company Obligation (ECO), which will replace the Carbon Emissions Reduction Target (CERT) and the Community Energy Saving Programme (CESP) schemes at the end of 2012, will oblige energy companies to make sure that solid wall insulation is included in the Green Deal and will target the coldest homes.

But Huhne was unable to say whether it will be covered by the Treasury's Levy cap on DECC spending - if it is, it will be severely hobbled, said Alan Whitehead.

Whitehead also criticised the lack of assurances over who will accredit the contractors and doubted that there will be enough skilled people to do the job required.

Most shamefully, he said, the Green Deal fails the basic test of fairness - the poorest households will get the least help and left till last. "Who will pay the shortfall if the savings don't add up? What will happen to homeowners who buy a house that is saddled with debt?" Currently there are no answers to these questions, and the Government has abolished Consumer Focus, the body that tackles unfair practices by the energy companies.

Support for nuclear power

In other areas covered by the Bill, Martin Horwood (LibDem MP for Cheltenham) charged that Section 102 of the Bill gives away the Secretary of State's negotiating power over decommissioning costs for nuclear power stations, potentially leaving the door open for the taxpayer to pick up the bill.

“This means that the Government has effectively abandoned its commitment that the taxpayer should not support the nuclear industry", he observed, pointing out the ｣61bn compensation that is being given by the Japanese government for the 800,000 people who have been evacuated as a result of the Fukushima disaster.

He said the Japanese are now reconsidering their energy policy with more emphasis on renewables and energy efficiency.

Huhne also said that an announcement on the fourth carbon budget, published by the Committee for Climate Change last December, will be made soon.

The Bill will now go to committee stage.

Financial Times poll finds 89% "would be cross" at nuclear new build

The vast majority of people in Britain do not want new nuclear power stations.

In a Populus poll for the Financial Times (FT) conducted between April 21st and April 25th, in answer to the question "Would you be cross if a new generation of nuclear power stations in the UK was to go ahead?" 89% said yes and only 11% said no.

However, the poll was reported in the FT yesterday, as being supportive of nuclear power post-Fukushima!

Under the headline "Fukushima fails to dent UK nuclear support", Kiran Stacey wrote "The Populus survey found more than eight in 10 people were either fully supportive of nuclear as the best way to tackle climate change or thought it might have a role to play in the UK’s future energy mix."

By combining answers to two different questions, he achieves a contrasting statistic. But if you download and read the actual survey, a very different picture emerges.

The survey did find that 42% were in favour of building new nuclear power plants, and 31% against. But 27% were "don't knows", meaning that it is more accurate to say that well below half of British people support new nuclear power stations.

Surveys often ask the same question in different ways to determine whether it is the form of the question that is influencing the answer.

Interestingly, across all the questions, many more women than men are against nuclear power, supporting my tentative and un-researched hunch which I wrote about last week, that more men, in particular alpha males (ie FT readers in particular!), support the technology.

Why do you think the FT is twisting the survey result this way?

Marine power set to surge forward

The UK could capture up to a quarter of the global market in marine energy, worth about £76 billion, creating over 68,000 jobs in the UK by 2050, according to new analysis from the Carbon Trust and the EC.

The UK is currently the global leader in terms of marine renewable development. Its level of innovation activity has significant capabilities compared to elsewhere.

Partly because of its significant natural resources, the UK could therefore become the 'natural owner" of these technologies, and leave the commercialisation process for the rest of the world.

But given the relative early-stage of the technology, a few years of careful, concerted demonstration and development is required.

Because of its coastline and geographical location, the British Isles is blessed with almost half of Europe's wave and over a quarter of its tidal resources, representing about 2-3% of global wave resources and around 10% of global tidal resources.

Marine technologies include wave machines such as the Pelamis, used in a 2.5 MW British installation off Portugal, tidal barrages and lagoons, only currently implemented in one place in Europe - La Rance, and marine current turbines, such as Marine Current Turbines Ltd's (MCT) SeaGen machine.

The Carbon Trust report does not cover tidal barrages and lagoons, only marine current turbines.

Capturing the potential

Countries which now lead the way in other renewable technologies, such as Denmark and Germany with wind power, have done so by consistently and carefully supporting the companies involved, from the early stage through to maturity with technical and financial help.

As a result, tens of thousands of jobs have been created in the wind industry in Denmark, with most products being exported.

By contrast, in America and Britain, support for wind power was sporadic and short-term in the 1970s and 1980s, so they fell behind.

The report argues that we should not make the same mistake again with marine energy.

The industry, eagerly anticipating its 2011 Conference next month in Brussels, is in a similar stage that the wind industry was in in the 1970s. However, unlike them, there is already a ready market in China, Korea, America and European countries with Atlantic coasts, so the conference will focus on steps to commercialisation.

And unlike wind and solar energy, tidal energy is predictable.

The report says that the total market for marine energy in a high scenario is worth up to around ｣460 billion in the period until 2050, with the market reaching up to ｣40 billion per year by that date.

In the UK alone, the report considers that up to 1 GW of marine technologies could be installed by 2020, rising to 27.5 GW by 2050. Of this, 18.5 GW is wave energy and 9 GW is tidal stream.

Globally, deployment of wave energy capturing machines could be 189 GW by 2050. However, this depends on significant technological developments, giving rise to considerable uncertainty.

The Carbon Trust says that up to 52 GW of tidal energy could be deployed globally by 2050.

Competition

Britain faces competition from the US, Spain and Portugal particularly. The Basque Government, through the Basque Energy Agency (EVE), recently awarded a 10.4 million euro contract for supply of power and communication lines for the Biscay Marine Energy Platform (bimep), a wave energy research project, to Spanish company Elecnor.

Around the world there are around 80 device developers in wave energy technology. 80% of these are at early research stage. The leading developers are Pelamis (UK), Aquamarine Power (UK), and Ocean Power Technology (US).

In tidal stream there are around 50 developers globally. About eight building devices at full-scale. Many are being developed at smaller scale, but second-generation designs which could overtake. Leaders include Marine: Turbines, Atlantis, Hammerfest Strom, Voith Hydro, Puse Tidal, Tidal Generation and Open Hydro. The UK leads with around 15 devices. Canada has around seven and United States around five.

Of around 40 universities in the world researching the technologies, 13 are in the UK. The UK also has good testing infrastructure through NaREC MEC and WaveHub, essential for development of robust technologies.

Overcoming barriers

There are currently many competing types of wave and tidal machine. Last month, an intensive and valuable three year European project called EquiMar was completed, which attempted to evaluate them all, and the state of the industry. Several British organisations took part, including the University of Southampton, Pelamis and Wave Dragon.

EquiMar has produced comprehensive research reports including protocols for site evaluation, performance monitoring, risk assessment, and future scenarios.

It identified that the main barriers to development are:
- the supply chain of components
- planning issues
- the diversity of concepts
- lack of standards
- and, above all the small size of the sector at present.

Volume purchasing is required to combat some of these barriers, as happened in, for example, the nuclear industry in the 1960s and '70s, and the wind industry in the last 20 years. This will improve the technical performance of the chosen devices.

The Carbon Trust report also summarises what the industry needs to expand:
- technologies must be proven and ready to upscale
- they must be cost competitive with other low carbon technologies
- public acceptance and no negative environmental impact
- a drop in support for fossil fuel and nuclear power, or failure of carbon capture and storage to meet expectations.

MCT is monitoring its SeaGen turbines in Northern Island for its impact on wildlife such as seals. Results so far are good.

Both reports underline that planning issues are key so that the regime for offshore developments is quite clear. Depending on the location there are some synergies with offshore wind farm development, such as connectivity to the grid.

In the short-term, most of the supply chain will be inside the EU, but as the industry upscales the costs are driven down together with new markets expanding elsewhere, there is a strong likelihood that the supply chain will create jobs elsewhere in the world without government support in the form of tax breaks etc. as have been given to the coal, oil and gas industries.