Tony Glover, a former Director of Policy and Gas at the Energy Networks Association, and an energy policy specialist, writes exclusively for Political Insight on the risks and opportunities of UK energy policy
When the Prime Minister spoke recently about £350 million being made available to cut emissions in heavy industry and drive economic recovery from coronavirus he was following a long line of Prime Ministers who have made future energy policy commitments with the public’s money.
No other policy area has received so much legislative time and political attention with so little public awareness. During the Blair and Brown years there was an Energy Bill a year at one stage, not to mention the Climate Change Act. There have been White Papers galore, Prime Ministerial commitments a plenty. There have been many prophets from Nicholas Stern, David King to Greta Thunberg. But do we profit from them?
Steadily they have created a policy straightjacket, which has received little public debate. They commit every UK energy user (i.e. everyone) to future gargantuan energy bills should they be implemented in full. This government has donned the straightjacket with aplomb.
Key energy policy risks hovering over the political and economic landscape include public acceptance, ownership structures, cost, geopolitical considerations and security.
The issue of public acceptance and cost I will look at in a moment. Ownership of our energy system is split between supply and generation, transportation and sale. The heftiest bit is transportation with the most comprehensive gas network in the world and one of the most comprehensive and reliable electricity networks in the world. Until December this could all have been taken over by a Government with a Marxian bent and little understanding of the impact this would have on investor confidence. Despite the recent Blair endorsement and Shadow Cabinet clear out Labour Party policy remains to renationalise this part of the energy system.
Whilst private ownership of energy infrastructure has delivered record levels of investment there are some problems here too. Who owns it? With major investment from Hong Kong based CKI in electricity and gas networks and Chinese Government investment in gas networks and electric vehicle infrastructure, not to mention nuclear infrastructure, there are potential geopolitical and security risks.
However, the key area of risk is in the one area the Government have complete control over. That is how they implement climate change policy. Let us look at just one policy commitment which was announced by Boris the other week. The Government will commit “£139 million to cut emissions in heavy industry by supporting the transition from natural gas to clean hydrogen power, and scaling up carbon capture and storage (CCS) technology”.
Hydrogen is becoming the latest buzz word but what does it mean in reality? The only project to date that has looked at the actual potential costs was the H21 Leeds project back in 2018. This looked at how the North of England could utilise its existing infrastructure and develop a mass hydrogen production facility. So far so good. The cost of production, carbon storage, transportation and appliance conversion however would be £22bn and reduce carbon by 14%. That’s a massive cost of £1500 for every single person in the North. Not so good. As a comparison by not converting natural gas into hydrogen but converting to an efficient gas condensing boiler a household can reduce its carbon footprint by two thirds all whilst saving a third of their heating costs.
Governments of all colours have set us on the trajectory of heat decarbonisation and hydrogen has been seen as the panacea. Why? Because the heat decarbonisation alternatives are even more unpalatable. The only practical one is to electrify our heating system. This will involve the mass roll out of very expensive heat pumps, which need a level of insulation impossible in most homes older than 80 years. They also have the annoying inability to change temperatures quickly. All well and good in countries like Sweden but not in our temperate island climate. The other urban option is digging up our towns and cities to build heat networks. This would result in the largest levels of traffic congestion ever seen and cost at least £1000 per household (according to a 2015 Government study). Worse still with this option you cannot even change supplier. Goodbye competitive energy market!
So we are left with the expensive and inconvenient or the expensive and slightly less inconvenient. So how have the Government consulted with the public on this, especially with those Red Wall seats that see energy costs as a critical priority? In reality a big fat zero. What polling and focus group work in those seats that have taken place in the run up to the General Election showed great hostility to the implications of these policies.
In reality these policies are a final vestige of the Cameron Tory detoxification programme. One designed to appeal to affluent Lib Dem seats. These voters were almost solely Remainers and see increases in energy costs as marginal at best and send their children on Greta Thunberg marches.
I am not saying that climate change doesn’t matter but I am saying that the easy words from the Government could start to rebound and make life much harder in the very seats they wish to claim as their own now. After a two year delay there is an Energy White Paper coming in the autumn. Could this be the beginning of the strange death of Tory Red Wall England?