Thursday, October 21, 2010

Osborne attacked for turning CRC into a carbon tax

Revenue from the Carbon Reduction Commitment, instead of being used to reward good environmental stewardship by those participants, will instead go to fill the hole that is the budget deficit.

This has come as a big surprise for participating organisations, especially as it was not even mentioned in Chancellor George Osborne's speech on the spending review.

This means that, for the first time, the UK has been introduced to a carbon tax by the back door.

It will hit all organisations that use large amounts of electricity, from supermarket and banking chains to hospitals, counsel and universities.

There was no consultation before the announcement of the measure. It is currently uncertain how participants are going to respond, and whether they will be so willing to participate.

The Treasury statement says that it expects to receive about £3.5 billion over the next four fiscal years.

British Retail Consortium director general Stephen Robertson said: "We are surprised and dismayed that the £1bn per year that businesses will put in to the CRC scheme is to be pocketed by the Exchequer.

"This is a stealth tax on business... a tax of this size surely merits a mention in the Chancellor's speech. It is appalling the Government is sneaking this in."

Richard Lambert, CBI DG, said: "Businesses that have just signed up to the flagship Carbon Reduction Commitment energy efficiency scheme will be very let down by the Government's unexpected announcement that it will remove the cash-back incentive. A scheme that was meant to change behaviour by encouraging energy efficiency has now become another stealth tax.

"By contrast, the commitment to clean coal technology, manufacturing off-shore wind turbines, and renewable heat and flood defences will boost private sector confidence in investing in low-carbon technology. Plans for a Green Investment Bank are also welcome, but the Government must get the design right to make it attractive to private investors."

Climate Minister Greg Barker said that the decision had not been taken lightly. It will increase costs for businesses but he argued that it made the structure simpler to administrate, and that “progressive businesses that act to improve energy efficiency will be able to minimise their exposure".

"This is a fundamental change to the scheme, with major consequences for the bottom line of those companies that are in the CRC," Craig Lowrey, an energy consultant at J.C. Rathbone Associates Ltd., said. This "is now another tax on industry in all but name."

The CRC was designed to cover about 10% of UK climate gas emissions and include up to 5000 companies, many of whom are not covered by the European Union Emissions Trading Scheme. They will have to buy credits equal to their emissions from April next year.

Allowances will cost £12 per tonne of carbon dioxide in the first place, but according to Treasury calculations the assumption is that it will rise to £16 in the tax year ending 2014.

This 'stick' is meant to act as an incentive for them to reduce emissions and increase efficiency. Those who fail to do so will pay more, and participating companies, when they signed up, were told they would receive this money as a 'carrot' to reward successful efforts.

The government was advised last month by its Climate Change Committee to simplify the programme by dividing it into public and private sector participants.

“This is effectively a tax on companies taking part," said Harry Manisty, environmental tax specialist in London at the accountancy firm PricewaterhouseCoopers.

Greg Barker added:“ I want to hear from business on how we can simplify and improve the scheme."

Carbon capture and storage under question as E.ON pulls out

Police defending the existing Kingsnorth power station during the 2008 Climate Camp protests.
Energy supplier E-ON has announced that it is abandoning efforts to build a new coal-fired power station at Kingsnorth in Kent, which would have been the first new coal burning electricity generating plant to have been built in the UK for decades.

It was to have been part of the government's carbon capture and storage demonstration programme, one of four such plants which the government hopes to build.

In fact, the only coal project left that is currently still under development using carbon capture and storage (CCS), is one to bolt on the technology onto an existing coal power station at ScottishPower's Longannet plant.

There, it is planned that the captured CO2 would be used in Enhanced Coal-Bed Methane Recovery (allowing methane gas to be recovered from coal seams and the CO2 to be stored).

The government's “market sounding exercise" for three of the four demonstration projects ended on 8 October. The Office of Carbon Capture and Storage is now considering this and will publish its response shortly.

The CCS pilots are in line to receive an estimated £1 billion of government funding, mostly under the EU Funding Mechanism “NER300”. This is a pot of 300 million EU ETS allowances set aside for supporting 8 CCS and 34 renewable energy projects. At current prices, each allowance is worth €15.

E.ON reckoned that even with this subsidy, building the Kingsnorth plant would be uneconomic given “current energy prices".

It said it has not withdrawn its application to build Kingsnorth at some point in the future, possibly as one of the later CCS pilot projects, after 2020.

Environmental campaigners are claiming this as a victory. Greenpeace, in a statement, said, “It does underline that right now the economics for new coal simply don’t stack up.

“But we need to make sure the future of dirty coal plants is dictated by climate and energy security needs, not simply the prevailing economic winds.

“That’s why Osborne’s promised Green Investment Bank is so important, and why we need it to be accompanied by tough new rules to put a legal limit on pollution from power stations."

Greenpeace is concerned that three later, second tranche, CCS demonstration plants, which are in line for funding via a "CCS levy" on energy bills, could result in new coal plants being built that only capture around a quarter of their carbon emissions.

But the Government has said it is committed that no new coal-fired power stations will be built without CCS, and emission performance standards. Climate Change Minister Gregory Barker told Parliament last Tuesday that he is working with his Scottish counterparts "to establish an emissions performance standard that would prevent coal-fired power stations being built without the provision of Carbon Capture and Storage (CCS) to enable them to comply with our Emissions Performance Standard (EPS)".

Unlike the first of the four projects in the CCS competition, these three second tranche ones will not receive direct government funding.

CCS is not cheap. A project in Norway, the Mongstad CCS centre, has seen costs rise from an original projection of $700 million to $1.02 billion, Reuters reported at the end of September.

Another recent report, from the Wuppertal Institute, said that with renewables prices coming down, it will be cheaper to invest in these and phase out fossil-burning plants, than in the still technically uncertain CCS.

Budgets slashed but programmes to continue

It could have been worse. With both environment departments, DECC and DEFRA, having their budgets slashed by around 30%, funding for climate change and transport infrastructure remains relatively intact, although the delivery channels and funding mechanisms are set to change radically. Here is a summary:


The review pledges to support transport infrastructure, including £14 billion for national rail improvements, the construction of Crossrail, plans to create a new high-speed rail network, an incentive scheme offering up to £5000 towards the cost of a new ultra low emission vehicle from January 2011 and electric car charging infrastructure.

International development

This is an area that has been ring-fenced, with an increase in Official Development Assistance to 0.7% of gross national income from 2013, and a new watchdog, the Commission on Aid Impact, to keep an eye on value for money and whether UK plc receives benefit from the spending.

£2.9 billion is pledged over the spending review period for international climate finance, to be funded jointly by DfID, DECC and DEFRA, in line with agreements made at Copenhagen and the UN climate talks.

Climate change and energy

£200 million is pledged to make sure that offshore wind plans continue, including the vital adaptation of ports to be able to accept the large vessels that are required for installing the huge turbines.

The Renewable Heat Incentive, which was in doubt and the subject of energetic lobbying, is to go ahead, as is the Green Deal. The RHI is to be funded by £860 million of Annual Managed Expenditure from next April. It is expected to encourage investment in anaerobic digestion, solar water heating and biomass projects.

"The Government will not be taking forward the previous administration's plans of funding this scheme through an overly complex Renewable Heat levy," the review adds. I.e., it will be funded by the government rather than the market.

The review says, “this will ensure the UK meets its 2020 renewable energy targets while making efficiency savings of 20%, or £105 million a year, by 2014-15 compared with the previous government’s plans."

The Green Investment Bank is to be set up using £1 billion, carved from departmental budgets and what the Chancellor called "additional significant proceeds from asset sales", to provide collateral for private financial investments in green infrastructure projects, such as offshore wind farms.

The paybacks received by customers signing up to Feed-in Tariffs may be reduced or, in the language of the report, “improved... rebalancing them in favour of more cost-effective carbon abatement technologies". This will happen at the next review stage for the FITs, and save £40 million in 2014-15. A further 70 million a year on average will apparently also be saved by using “support for lower value innovation and technology projects".

Up to £1 billion is to go towards the first for carbon capture and storage (CCS) plants – see separate post. This money comes from general taxation and will not require an increase on electricity bills. Whether such an increase will be introduced in future will be decided at the same time as the reform of the climate change Levy to support the carbon price, after spring 2011.

However, DECC's core budget is being slashed by 30% in real terms by 2014-15 by focusing on key priorities and cutting projects which do not give “value for money".

DECC says it will reduce resource spending by 18% in real terms, and increase capital spending by 41% in real terms. The Department’s Administration budget will be reduced by 33%.

The status of the Marine Renewables Development Fund, which allocates funding for wave and tidal, is at this stage unclear.

The government remains committed to obtaining 15% of energy from renewables by 2020.

Continuing to protect the stockpiles of nuclear waste at Sellafield is assured: no cuts there. In fact, spending will increase, to compensate for a projected decrease in the Nuclear Decommissioning Authority's income.

But future nuclear power takes a hit with the axing of Government funding for the National Nuclear Centre of Excellence.

DECC is reviewing the work delivered at arm’s length by bodies such as the Carbon Trust, Energy Saving Trust, and the delivery arm of Ofgem. The Energy Efficiency Partnership for Homes is also being reviewed.

Fuel poverty and energy efficiency

DECC is to undertake a review of fuel poverty policy to address this stubborn problem. The language here, as with the Green Deal, is “working as an an enabler rather than the default provider" of energy efficiency services to households, in partnership with the private sector.

So, it is envisaged that private enterprise will take over gradually from the Warm Front programme, saving £345 million by 2013-14. There is no indication, as yet, what kind of quality controls will be in place to avoid quick fixes and get long-term value for money.

From April 2011, energy suppliers will provide greater help with the financial costs of energy bills to more of the most vulnerable fuel poor households, through Social Price Support – with total support of £250 million in 2011-12 rising to £310 million in 2014-15.

The Carbon Reduction Commitment Energy Efficiency scheme, which met with loud opposition from quarters in the private sector, is to be simplified. The first allowance of sales for 2011-12 emissions will now take place in 2012, not 2011.

In a surprise move for participants, revenues from these sales, totalling an anticipated £1 billion per year by 2014-15 world, rather than being recycled to participants in the scheme, go into the Treasury coffers [see separate post], making it a carbon tax.

The government will make permanent the temporary increases to Cold Weather Payments provided in the past two winters, at a cost of £50 million a year, so that eligible households receive £25 for each seven day cold spell recorded or forecast where they live.

DECC will issue guidance to re-emphasise best practice on heating, cooling and lighting Government buildings. This guidance will encourage departments to reduce waste on energy costs, helping to reduce the Government’s £95 million annual energy bill, whilst saving carbon emissions at the same time.

Environmental management

DEFRA will continue to invest in flood defences and coastal erosion risk management, with £2 billion allocated over the spending review period.

DEFRA has had its budget cut by a similarly huge amount to DECC - 29% - by more than halving its number of Arms Length Bodies to 39. It will reduce its running costs by £174 million over the period.

The environmental stewardship scheme, which pay farmers to take conservation measures to protect biodiversity, has had its budget slashed by £66 million by 2014-15, but the review says it will remain open to all farmers in England.

Seven waste PFI projects face the axe, because it's judged they aren't required any more to meet landfill diversion targets, saving £3 million. These include the North London Waste Authority's plans, which received the single largest award of waste PFI funding in March 2010 and the £1 billion Cheshire project. The full list is:

• Cheshire West and Chester, and Cheshire East
• Coventry, Solihull and Warwickshire (‘Project Transform')
• Gloucestershire
• Leicestershire
• Milton Keynes and Northamptonshire
• North London Waste Authority
• South London Waste Partnership.

11 other waste PFI projects currently in procurement well remain so, and the 21 other deals that had already been signed are secure.


Sunday, October 17, 2010

Osbourne axes Severn barrage

The BBC has just reported that George Osborne, the Chancellor, has told Chris Huhne, energy and climate change Secretary, to axe the Severn barrage.

This is a blow to the country's efforts to move towards a much lower carbon economy. Huhne is instead likely to sanction the building of new nuclear power stations.

The other options were intended to appease environmental campaigners worried about the loss of precious wildlife habitats in the estuary.

The technology could have generated up to 5% of Britain's electricity requirements, and created hundreds of jobs and develop technology that could have been exported around the world.

Instead eight sites have been approved for new nuclear power stations by 2025, which, if they go ahead, are likely to be financed and owned by foreign companies and produce fewer jobs. These are:

• Bradwell, Essex
• Hartlepool, Borough of Hartlepool
• Heysham, Lancashire
• Hinkley Point, Somerset
• Oldbury, South Glos.
• Sellafield, Cumbria
• Sizewell, Suffolk
• Wylfa, Isle of Anglesey.

They would add to the growing and expensive stockpile of nuclear waste, providing danger for thousands of years to come. In the Spending Review, more money was allocated to the task of safeguarding the existing stockpile.

Tidal power, on the other hand, is renewable and free, but the uranium for nuclear power stations is dangerous to mine and is likely to run out within 60 years.

A tidal scheme could last around 120 years, significantly longer than nuclear, thermal, wind, and other energy infrastructure, but in common with other hydropower generation projects.

This makes its overall levelised costs – lifetime costs – comparable to or better than other forms of generation, but the initial high capital cost is prohibitive in the current economic climate, the report says.

Supporters of the tidal project, which would link Lavernock Point near Cardiff, to Brean Down near Weston-Super-Mare, claimed it could generate 5% of Britain's electricity.

Dr Rob Kirby, an independent expert on the Severn Estuary, has worked on the project for the last 40 years, said: "The government's view is that it's too big a project to approach in financial terms.

"It's quite unambiguous - the Cardiff to Weston (barrage) can only benefit the environment and those who say otherwise are not telling the truth."

Shadow Welsh Secretary Peter Hain said scrapping the barrage would be "equally disastrous" for the economy and the environment.

"Not only is Chris Huhne turning his back on the proposed barrage scheme that would have created hundreds of good quality green jobs for Welsh people, it appears that he decided to abandon in its entirety the idea of using the Severn estuary as a generator of electricity," he said.

The feasibility study into a tidal energy project in the Severn estuary concludes that its total cost – over £30 billion – makes it unaffordable at the present time because a significant proportion of the funding would have to be borne by the taxpayer, and it would be difficult to attract sufficient private investment.

The report does not rule out a project in the estuary in the longer term if it could be shown that it did not fundamentally change the estuary's natural environment.

It also highlights the fact that even the scale and impact of smaller schemes like a tidal lagoon would be unprecedented in an environmentally sensitive area. Providing compensation for any possible damage is considered to be challenging.

The report argues that other low carbon energy sources represent a better deal in the short term for taxpayers, industry and consumers.

Dr Neil Bentley, CBI Director of Business Environment, commented: “Tidal power has the potential to play a significant role in the UK’s energy future. Given the state of the public finances, it is understandable that Government investment in the main Severn Barrage scheme has been ruled out at this time. But the Government should continue to encourage innovation in tidal power to reduce the cost of this technology.”

Welsh Environment Minister Jane Davidson added, “Two of the three schemes assessed under SETS showed a good deal of potential for extracting renewable energy from the area.

“However further work is needed to develop these technologies to the point where they may be considered as part of any future Tidal Power scheme.

“I would urge the UK Government and others to continue working with us and key business partners such as Veredeg and Rolls Royce on the development of these emerging technologies, not just for applications in the Severn but also in other locations around our resource rich coast line.

"These technologies have real potential to provide a vital source of renewable energy for the whole of the UK, which would enable us to increase our energy security and help in the global fight against climate change”

Saturday, October 09, 2010

The death toll of fossil fuels - and my new book

Who said this, and when?

"Eventually industry will no longer find in Europe the resources to satisfy its prodigious expansion... Coal will undoubtedly be used up. What will industry do then?"

It was solar pioneer, Augustin Bernard Mouchot, after demonstrating an early industrial application of solar thermal energy as long ago as 1880.

Four years earlier he had demonstrated the use of solar power for cooking, by making a block of ice using a parabolic dish collector.

The solar age is undoubtedly coming - and it's been waiting to arrive for a long time, continually frustrated by the aggressive marketing of cheap energy.

I have just finished writing my latest book, The Earthscan Expert Guide to Solar Power for Power, Heating, and Cooling.

In writing it I have discovered some astonishing facts about just how long the technologies have been around... and how different the twentieth century would have been if we had been forced to rely on solar and other renewable sources of power instead of fossil fuels...

...if we hadn't been cursed - as well as blessed - with nature's bequest of such huge quantities of oil, gas and coal.

Because from the first world war - partly fought over access to the newly discovered oilfields of Iraq, which was created as a result of that war - through the Six Day War and the recent Iraq wars, not to mention hundreds of other conflicts, access to fossil fuels has been the cause of millions of deaths.

With growing awareness of the impact of climate change, their aspect as a curse on the global scale has become increasingly apparent.

In 1913, Frank Schuman, who designed the world's first solar power station, dreamt of a completely solar powered world. It was theoretically possible then, as indeed it is now.

Nowadays, the phrase “energy security" is being used by those who want to see local, sustainable sources of clean energy replace dirty fossil fuels.

This is because the sun, wind and other renewable sources of energy are available abundantly, everywhere on the planet, with no need for conflict over their use. Looking at the history of solar power it is clear how its development has suffered as a result of the abundance of fossil fuels.

Humanity - or its leaders - are now faced with a clear choice: whether to stick with the status quo and vested interests that aggressively promote as inevitable, a continued dependence on fossil fuels; or whether to accelerate the deployment, research and development into solar and other renewable, sustainable technologies and practices.

My new book makes the case for the latter, looking at all the available technologies, and the sunrise ones:

  • passive solar architecture

  • solar water heating

  • solar thermal electricity generation.

Here is a not-exhaustive list of the technologies it looks at from the point of view of their end use:

  • Heating and cooling space: passive solar design, urban planning, passive stack ventilation, phase change materials, unglazed transpired collectors, solar-powered chillers and coolers
    Lighting: glazing, special glass coatings; sun pipes

  • Heating water: solar water heating systems; evacuated tubes; swimming pool heating; active solar cooling; applications for large buildings and districts
    Cooking, food drying, desalination and water treatment

  • Electricity: thermoelectric devices, photovoltaic modules, system design, process heat, concentrating solar power

  • Transport: solar vehicles, hydrogen production.

The potential of these technologies is completely clear and proven. The scientific case for the likelihood with business-as-usual of a runaway greenhouse effect, has been conclusively established.

The stakes could not be higher and the choice more stark.

The Earthscan Expert Guide to Solar Power for Power, Heating, and Cooling will be out next year.