Energy cold war goes hot
- 23 Jul 2012, 17:00
- Robin Webster
Some political fights go on under the table, in corridors and
behind the scenes. Some don't, and over the last few weeks, a cold
war between the Treasury and the Department of Energy and Climate
Change (DECC) over energy policy has 'gone hot'.
The latest salvo comes from Parliament's
Energy and Climate Change (ECC) Committee, which has released a
describing the latest energy reforms as "unworkable" and
"vacuous" and accusing the Treasury of "
imposing policies with perverse consequences".
Meanwhile chancellor George Osborne has mounted an
all-out push for expanding gas power as a 'core' part of the
UK's future energy strategy.
The issue: Britain's future energy mix
What at first appeared to be a fairly a niche tussle over the
level of reductions in renewable subsidies to wind power has been
revealed over the weekend to be a rather large argument between
elements of government - apparently over whether they subscribe to
the legally-binding emissions targets contained in the Climate
The warring parties
This behind the scenes disagreement has been conducted in a
media environment where there are plenty of people who will argue
that wind power
doesn't work and we need gas for security of supply and to
keep household energy bills down. Others counter that onshore wind
is a viable
technology, future gas prices are at
least as likely to go up as down, and relying on gas for our
future power needs will scupper climate targets.
Fuelled by a belief that gas is cheap and wind power doesn't
work are the pro-gas lobby -the Daily Telegraph,
Daily Mail, backbench Tory MP Chris Heaton-Harris and his
anti-wind MPs, George Osborne, the Treasury and various
Pro-renewables and bothered by continuing government support for
fossil fuels are the decarbonisers - the Department for Energy
and Climate Change (DECC), energy minister Ed Davey, the Lib Dems,
the Guardian, the
CBI, the renewable energy lobby, and
voices from the investment community who want to put their
money into renewables.
Despite the attempts of various newspapers to present this as a
straight fight between the Tories and the Lib Dems, this camp also
includes some significant
Then there's David Cameron who has remained silent.
1. The Energy Bill
Introduced to Parliament in
draft form in March, the aim of the UK energy bill is to reform
the UK electricity market, paving the way for a shift to low-carbon
energy. It has been met with a cool reception by those who might be
expected to carry out or support such a shift, getting strongly
criticised by the
ECC Committee, the
renewables industry, green
groups and renewables
According to Tim Yeo, the ECC committee's chair, this is partly
because the Treasury significantly influenced the draft bill,
including setting a cap on the costs the reforms would place on
consumer bills - presumably the result of active (but
not always accurate) media campaigns against so-called 'green
taxes' on energy bills.
2. Subsidies for wind farms
Back in February, 101 Conservative MPs (and a handful of
signed a letter to the Prime Minister objecting to the roll-out
of onshore wind farms and asking for him to cut subsidies for wind
Over the last few weeks some parts of the media opposed to wind
farm expansion appear to have been
under the impression that the battle was won and the subsidies
would be abruptly cut by a quarter.
Following the release of a
leaked letter from George Osborne, it
now appears that despite the Telegraph describing it as a
done deal, the 25% cut was never agreed - Osborne writes that
he will accept a 10% cut to the subsidies, on the basis that the
energy department allows the expansion of gas power.
Which brings us neatly to...
3. Gas policy
in 2008, the government's advisory body the Committee on
Climate Change (CCC)
recommended that, in order to deliver an 80% reduction in
emissions by 2050, emissions from the power sector should fall to
almost zero by 2030.
This would effectively mean that gas would be used to produce
electricity only as a backup to wind power, and only with carbon
capture and storage (CCS) technology fitted to reduce emissions.
And all this in less than twenty years.
The government has so far refused to accept this target, which
not contained in the draft energy bill. In
February, DECC announced gas power stations constructed now
will be able to emit without restrictions until 2045. The CCC was
not impressed, arguing that this leaves the door open for a
'dash for gas', driving up carbon emissions and threatening climate
leaked letter from Osborne makes it clear that he wants an
expansion of gas power - which puts him at odds with the Committee
on Climate Change.
When do we find out who wins?
Government energy bills have a difficult recent history - and
looking back at bills from
2011 which set out various different visions on the UK's
future energy mix, you might fear that the answer is
But this time, maybe something is different. Investors are
looking for the government to create some certainty in the
energy market, which may put pressure on government to make a
decision about onshore wind subsidies fairly soon.
Meanwhile, the energy bill is due to be
debated in the Autumn, so that particular tussle is going to go
on for a bit. The ECC committee's far-reaching recommendations
could be difficult to ignore, leading to a bit of rewriting.
As far as gas policy goes, the government argues that it could
introduce a limit on emissions from gas power plant at any point.
If it wants to - so that one could run and run.
In this case it does appear that Osborne is fighting a very
personal battle, and
if someone else takes over his job, that could change the
But at this point we're into the territory of reading the
political runes, so your guess is as good as ours. (Maybe Osborne
will be made energy secretary in a reshuffle?)
Finally, if everyone continues to argue ad infinitum, the
stand-off will be resolved when the lights all go out and everyone
has to sit around in the dark, grumbling.