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Saturday 17 February 2018
17 February 2018 - NEWS UPDATE
Renewable Energy

Renewables sector says Osborne's dash for gas is short-sighted

Renewable energy sector leaders and environmental campaigners have criticised the Chancellor's 'dash for gas' saying his policy is short-sighted and will lead to economic decline. And they claim a plan for around 30 new gas-fired power stations coupled with tax incentives for shale gas could threaten the UK's emissions targets.


Chancellor George Osborne

The independent Committee on Climate Change described the Government's dash for gas as a Plan Z, not a Plan A.

David Kennedy, Chief Executive of the CCC, commented: The gas-generation strategy includes scenarios, which model early power sector decarbonisation. These are economically sensible and compatible with meeting legislated carbon budgets.

"It also includes a scenario which reflects a new dash for gas, with very limited investment in low carbon technologies through the 2020s. This would not be economically sensible, and would entail unnecessary costs and price increases.

"Neither would it be compatible with meeting carbon budgets and the 2050 target. Early decarbonisation of the power sector should be Plan A – and the dash for gas Plan Z.

"Including these very different investment paths in the strategy exacerbates mixed signals already given by the Government and is damaging for the sector investment climate.

"It will be essential going forward to ensure that the Electricity Market Reform is aimed at achieving carbon intensity of 50 gCO2/kWh in 2030 through investment in a portfolio of low-carbon technologies, rather than a dash for gas which would raise long term costs and risks."

However, the South West's green economy should benefit from £600m for BIS for new scientific facilities for a focus a focus on data, energy efficient computing, synthetic biology, advanced materials and energy storage projects.

This funding will enable the expansion of the National Composites Centre (NCC) at the Bristol and Bath Science Park (BBSP), which pioneers the development of ultra-light weight materials for the aerospace, automotive and renewable energy sectors.

George Osborne used the Treasury's Autumn Statement on the country's finances to unveil a controversial gas generation strategy critics believe will lock Britain in to a high-carbon future.

He said Britain should not miss out on the opportunities being enjoyed in the US where gas prices have plunged due to shale gas produced by fracking.

The Gas Strategy published yesterday says modelling by DECC suggests that up to 26 GW of new gas plant could be required by 2030.

It adds: "It is the cleanest fossil fuel. Gas-fired power stations are relatively cheap and quick to build, and investment in new gas plant will offer employment opportunities throughout the country."

But Andrew Raingold, Executive Director of the influential Aldersgate Group, said: "If the Chancellor's Autumn statement is intended to heal the UK economy, the gas strategy is a route that will lead us straight back to economic decline. Investors who heaved a sigh of relief with the publication of the Energy Bill last week will now be thrown back into a state of confusion about the UK's energy future.

"This undermines investment and jobs, and will raise the capital cost of renewing our energy infrastructure: a cost that will be passed straight onto the bills of businesses and consumers.

"Businesses have repeatedly warned the Chancellor about the economic cost of locking the UK into high imported fossil fuel dependency: rising and volatile energy prices, serious concerns about security of supply, and a missed opportunity to build up UK supply chains.

"Already households are paying £70 per year directly to Qatar for imported gas – money we could be keeping in the UK economy by investing in renewables on our soil.

"Today's gas strategy is the product of short-run economic models that have nothing to say about long-term, sustainable growth."

In October, the Aldersgate Group coordinated a letter to the Chancellor with the support of over 50 large companies stating that a 2030 carbon target for the power sector is essential for stimulating new growth in the economy.

It argued that only greater clarity from Government could unleash the £110bn investment required to transform the UK's electricity infrastructure and drive wider economic benefits.

Energy Secretary Ed Davey, who is in Doha, said: "We have always said that gas will have a significant role in our electricity mix over the next two decades – this is not new.

"Gas will provide a cleaner source of energy than coal, and will ensure we can keep the lights on as increasing amounts of wind and nuclear come online through the 2020s.

"The strategy we set out today follows extensive consultation and is consistent with meeting our legislated carbon budgets and with significant decarbonisation of the power sector."

The policy announcement drew reactions of anger and caution. Environmental groups and businesses claim the UK's best interests are served by building a more sustainable future using wind and other low-carbon power sources.

Ronan O'Regan, director of energy and renewables at PwC said: "While the new gas strategy has expectations that 26GW of new gas-fired generation capacity could be required through to 2030, this announcement of itself provides no guarantee that all of this capacity will be developed. The recent history of UK gas-fired power stations is one of challenging market conditions, with many gas plants currently loss making. This is the biggest barrier to investment.

"The Government's proposals suggest that increasingly new gas capacity will require support payments, as proposed through the Electricity Market Reform (EMR) capacity mechanism. The question remains whether any developer will in future build new capacity without this form of support. The long-term impact of this on our deregulated markets is not yet fully understood, but it means that most of our generation mix will fall under some form of regulatory support.

"The Government are hedging their energy policy bets to allow for more dependence on gas if the potential for shale gas (supported through tax incentives) in the UK starts to approach that seen in the US. It is also difficult to reconcile a gas growth strategy with moves to fully decarbonise the energy sector. This is only achievable if new gas plant are increasingly built with carbon capture and storage in mind and to date performance of our Carbon Capture and Storage programmes is one of delays in getting the required demonstration plants up and running."

Joss Garman, political director at Greenpeace warned: "The chancellor is misleading people to position shale gas as the answer to UK's energy woes. The impact of fracking in the US is irrelevant because energy experts say the US shale gas boom cannot be replicated here.

"Over a third of the UK's economic growth in the last year came from the low-carbon sector. By ignoring this and instead offering incentives to the gas industry, George Osborne is undermining crucial green growth."

Andy Atkins, executive director at Friends of the Earth, added: "The big polluters must think Christmas has come early - but if bad Santa Osborne's gas-fired energy strategy gets the go-ahead it will leave cash-strapped households and the environment with a thumping hangover for decades.

On George Osborne's assertion that gas is "lower cost" and the measures to support shale gas exploration, REA Chairman Martin Wright said: "The Chancellor must understand that gas is not cheap, nor does it offer stable pricing in the future. It has been by far the major driver of energy bill increases in recent years, and there is no evidence for the presumption that shale gas will have the same impact on prices here as it has in the USA. Moreover, increasing demand from other economies will undoubtedly drive prices and volatility.

"The Strategy's anticipated cost of capturing and storing the carbon emissions from gas in the 2020s is higher than nearly all renewable sources of power. So why is there such an emphasis on this technology?

"Ironically we are getting a cross-departmental Office for Unconventional Oil and Gas, when what the UK needs is an effective cross-departmental Office for Renewable Energy Deployment."

And on the impact of the Gas Strategy for carbon and climate objectives, Martin Wright added: "Osborne and the Gas Strategy launched today show that the UK doesn't seem to be able to break its habit on fossil fuel, even as the Climate Change Ministers negotiate in Doha. The announcements today send a clear signal about the Government priorities and investors will respond to that.

"The UK has some of the best renewable resources in the world, which are totally sustainable and which offer stable low-cost energy in future - we should prioritise exploiting those.

"What we needed today was an assurance that gas would play an important short to medium term role, supporting renewables in the transition to a low carbon energy future. Instead gas has been placed centre-stage. It is vital that the Renewable Energy Roadmap, expected to be published next week, maintains investor confidence in renewables.

"Contrary to the current zeitgeist, we remain of the view that long term decisions have to be made. We are firmly of the view that climate change remains an issue of central importance and we have a responsibility to future generations. The whole tenor of this announcement suggests a fundamental failure to accept the scientific evidence on climate change."

Renewable gas, from anaerobic digestion and gasification technologies, could play a vital role in the UK's gas future, but is not acknowledged in the Gas Strategy. REA Head of Biogas David Collins said: "It is disappointing to see no mention of renewable gas in the Government's Gas Strategy. Today represents a missed opportunity to celebrate the genuinely good work the industry and Government is doing on the ground to overcome the barriers to injection of biomethane into the gas grid.

"National Grid estimates that biomethane, if exploited fully, could provide around 25% of the UK's residential gas supply. Renewable gas can make a vital contribution to boosting the domestic security of our gas grid. It also has excellent emissions and landfill displacement properties and provides tremendous economic opportunities for farmers and small businesses."

And the solar industry aid it was concerned by the new Gas Strategy because it does not reiterate the binding 2020 renewable energy targets.

"As the Committee on Climate Change said today, by including a dash-for-gas scenario the Government 'exacerbates' its habit of sending mixed signals to investors.

"The Chancellor and the Prime Minister both claimed today that the Energy Bill had given the renewable energy industry the certainty it needs. This is not the case, particularly for independent generators and on-site investors, including in solar. The delay to the decision on Renewables Obligation (RO) banding levels for solar PV is leading to an investment hiatus in the industry. There is also confusion about mid-sized solar, which risks falling through the policy framework.

STA Head of External Affairs Leonie Greene said: "The Chancellor and the Prime Minister are wrong to claim that renewable energy has a 'very clear and stable framework'. We are still seeking stability under both the Renewables Obligation and Electricity Market Reform for solar power. Clarity is urgently needed – not least because solar power is set to be a lot cheaper than gas with CCS in the 2020s.

"The Government today announced it will be setting up a cross-departmental 'Office for Unconventional Gas and Oil'. The Government's Gas Strategy today anticipates up to 37GW of new gas by 2030, yet their modeling shows that only 13GW by 2030 is compatible with the Committee on Climate Change recommendation of a 50g/kWh CO2 target, a target the STA supports.

"Furthermore with the Government's push for new nuclear in the 2020s it is difficult to see how the Government envisages the UK's renewables industry expanding into the next decade. Indeed, the Government's apparently preferred 'Diversified Energy Mix' scenario graph in the Gas Strategy shows the contribution from renewable power barely increasing in the 2020s.

"A recent YouGov poll shows more than half of the public back investment in renewable energy and less than a third oppose it. Solar power has achieved the greatest cost reductions of any energy generation technology (70%) over the past two years.

"With investment today, the solar industry is confident of being competitive with all forms of energy generation within the decade. IPCC research shows solar power could be the biggest source of electricity in the world by 2050 and the global market was worth $136 billion last year.

STA Solar Specialist Ray Noble said: "The Treasury is fixating on the wrong technologies. The UK needs a dedicated Solar Power Strategy. If the Government is serious about tackling climate change, answering the looming energy crunch and seizing huge economic opportunities, it needs to vigorously back solar technology.

"It is particularly disturbing to have this unconventional gas push announced as nations struggle to hammer out a desperately needed global agreement on preventing dangerous climate change."

Caroline Lucas, Green MP said: "At this critical moment for the UK's energy policy, Osborne's gas strategy looks like nothing short of a disaster - for the economy, the environment and for people's energy bills.

"This reckless move, driven by ideology not evidence, risks locking the UK into an expensive polluting fossil fuel future - increasing our exposure to volatile gas prices and forcing controversial fracking developments onto communities before the full impact is understood.

"While we know that gas can play a small part as a bridging fuel as we move to greener sources, the government's decision to sign off upwards of 30GW of new gas simply flies in the face of warnings about the consequences of a "dash for gas" on both consumer bills and legally binding climate targets.

"If the Chancellor was really serious about keeping people's energy bills down and improving energy security, he'd put his money on renewables - where the costs are entirely predictable and falling all the time - efficiency, and reducing energy demand, rather than deepening our dependence on polluting gas, where prices are set to keep rising.

"The Chancellor's new Office for Unconventional Gas and his proposed tax breaks for shale gas reveals the extent of this government's irrational obsession with hard-to-reach shale - and with keeping the UK addicted to fossil fuels.

"Gifting tax breaks to companies like Cuadrilla to leach every last bit of fossil fuel from the ground when the IEA is warning that we need to keep this stuff in the ground to avoid dangerous climate change makes a mockery of our claim to be taking a lead in international climate negotiations."

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