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Emission Reduction Plan

By Dave Elliott

Between 1990 and 2015, UK greenhouse gas emissions fell by 38% and should fall by 48% by 2020 on current policies, within the framework of carbon budgets established by the Climate Change Act. Looking further ahead, the UK has committed to a 5th carbon budget (for 2028-32) which requires greenhouse gas emissions to be reduced by 57% by 2030 (against 1990 levels), on the way to at least 80% by 2050. But there is still a way to go.

The 5th carbon budget has been set in line with the advice of CCC, the Committee on Climate Change, a body of experts set up under the Climate Change Act to advise the government. However, measures to meet this target are not yet in place. The Government has still to published the next emissions reduction plan and the snap June election may delay it further: www.edie.net/news/11/UK-Clean-Growth-Plan-delayed-after-snap-general-election-announcement But the latest energy projections from BEIS are very positive, showing what could be done: www.gov.uk/government/publications/updated-energy-and-emissions-projections-2016  and www.carbonbrief.org/analysis-dramatic-shift-uk-government-outlook-gas-clean-energy

BEIS sees renewables expanding to around 180TWh by 2035, as costs continue to fall, with renewables projected to reach 36 GW by 2030, 71% more than the 21GW of new build capacity seen in the 2015 BEIS projections. According to IRENA, they had already reached 33.5GW by 2016! Meanwhile, BEIS expects nuclear to get to near 160TWh by 2035, but expansion is slower than originally predicted, only reaching 34 TWh in 2014 (down from 44TWh projected in 2015) and 67TWh in 2014, in total a reduction of around 50%. These and other trends lead to a 284 MtCO2e reduction, in non-traded emissions in the 4th carbon budget period (2023-27) and 316Mt in the 5th.

However, not everyone is happy with the cost of all this, which some see as very high, with lurid media headlines about ballooning power bills. The Committee on Climate Change (CCC) says that there was a rise of £105, or 9%, for the average £1,160 dual fuel bill in 2016 due to green policies, including subsidies for wind and solar power. And it has predicted that meeting the UK’s carbon targets would see the cost of the subsidies rise £200 to give an average bill of £1,350 by 2030. That would include the proposed new nuclear plants. But CCC expected the increases to be more than offset by the energy and cost savings from the overall programme: www.theccc.org.uk/2017/03/16/uk-climate-action-has-reduced-emissions-without-increases-in-household-energy-bills/

Predictably, the Global Warming Policy Foundation was not convinced. It says CCC’s data show that energy and climate policies have increased prices to domestic consumers by 33% in 2016. And it says this figure will rise to 40% in 2020 and to over 50% in 2030: ‘government subsidy spending on renewables, and other climate policies, is preventing consumers from reaping the benefits of efficiency measures leading to lower energy bills.’ It wants the CCC reformed: www.thegwpf.com/gwpf-condemns-misleading-committee-on-climate-change-report-on-policy-costs/

The carbon support mechanism is part of the policy mix that some see as a problem. However, research by Imperial College London for UK power plant operator Drax found that operating without a carbon price would have increased UK carbon emissions by 21%, to levels not seen since the 19th Century: https://www.edie.net/news/11/What-would-happen-if-Britain-had-no-carbon-price-support-/

Even so the government is clearly under pressure, with the BEIS Select Committee saying that the current policies on industry, energy and climate still do not add up: www.publications.parliament.uk/pa/cm201617/cmselect/cmbeis/616/61607.htm And the Lords Economic Affairs committee, worried about the costs, called for more focus on energy security and costs, less on carbon. renews.biz/106026/uk-should-prioritise-energy-security/ Green commentators saw this as ‘confused’ ‘misconceived’ and ‘slanted’. Green polices have added about 10% to bills, not the 58% claimed: www.ukerc.ac.uk/news/why-we-can-t-afford-to-move-post-truth-in-energy-policy.html

The reality is that most of the overall cost increases have been due to wider market changes, with energy utilities imposing what some see as provocatively high charges. The usual remedy in such situations is to call for more market competition or, if really pushed, price caps. That is what now seems likely – new market arrangements, with limits on utility price rises and carbon. The green policies will also no doubt take another hit. Their cost has up to now been capped by the so called Levy Control Framework, but the Spring Budget announced that is was to be replaced by an as yet unknown system: https://renewablesnow.com/news/uk-to-replace-levy-control-framework-560884/

However, there may be an escape route available. When and if the UK finally leaves the EU, it will be able to ignore the EU renewable directive and the ‘15% by 2020’ renewable energy target that the UK agreed under it.  So there would be less pressure to push renewables across the board: www.bloomberg.com/news/articles/2017-04-05/u-k-said-to-seek-end-for-clean-energy-goal-that-may-sour-brexit  But the timing of such a contentious move would be sensitive given the complex BREXIT negotiations!

The debate in the UK is shaped in part by the assertion that, because of the the EU Renewable Directive, we are paying too much in subsidies for renewables. Even leaving aside the point that the government seems happy enough to subsidise nuclear power at very high levels, the UK renewable subsidies are mid range in comparison with those in the rest of the EU.  A report from the Council of European Energy Regulators ‘Status Review of Renewable Support Schemes in Europe’ puts the weighted average subsidy paid to renewable generators in EU 26 in 2015 as €110 /MWh. The maximum was €184/MWh in the Czech Republic and the minimum €16.2/MWh in Norway (with a lot of cheap un-subsidised hydro) while the UK came in at €75/MWh: http://www.ceer.eu/portal/page/portal/EER_HOME/EER_PUBLICATIONS/CEER_PAPERS/Electricity

If you don’t like renewables, then of course this is still too high. But €75/MWh is much less than the Hinkley €109/MWh CfD subsidy, to be paid from maybe 2025 if it goes ahead, and the renewables are getting cheaper all the time, with the next CfD round, now open to bids, expected to deliver some projects at maybe £50/MWh (€60). And by 2025 many more of them could be half the figure for Hinkley, or even lower, with PV solar booming despite FiT cuts, and on shore wind doing well despite being frozen out of the CfD: https://cleantechnica.com/2017/04/13/onshore-wind-projects-proceed-without-subsidies-uk/ And offshore wind is looking likely to catch up: https://www.bloomberg.com/news/articles/2017-04-20/gigantic-wind-turbines-signal-era-of-subsidy-free-green-power  Certainly in some locations, the price falls are already very dramatic e.g. in the USA:  http://reneweconomy.com.au/u-s-wind-solar-prices-downward-slope-even-without-tax-credits-98225/

However, meantime, back in the UK, the new CfD auction is going ahead but who knows what the snap election will bring?

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