So…..how safe is that Husky?

Huskies

Well it’s not going very well on the renewables and low carbon front is it.? Ed Davey, until recently in charge of the whole business, doesn’t think it is, asking recently in a tweet:

‘does Cameron plan to strangle a husky given green deal cuts after wind and solar hits, end to Ccl exemption and zero homes abolition’

Must have been a titanic feat of character editing to get all that in 140 characters, I must say, but it does perhaps encapsulate the central question: why is all this suddenly happening? As Ed says, we have had in very short order, the apparent termination of support for onshore wind, a radical deflation of support for solar (both the cheapest renewables currently around by the way) the rug pulled smartly under the whole zero carbon homes programme, in that ..er.. there won’t be one anymore, and the clever juggling of the climate change levy so that it is now quite simply a levy, with the involvement in climate change abruptly terminated. Oh and to add to that, we have the prospect of the levy control framework being bust and quite possibly (Amber Rudd, Ed’s successor as DECC  SOS was conspicuously coy when I asked her about it this week) no more auctions for the award of contracts for difference for renewable technologies until after 2020.

So is it just about strangling a husky, or to put it another way, getting on with ‘cutting the green crap’ now that Conservatives can make the decisions all by themselves and without those pesky coalition partners to think about? I’m not sure it is as simple as that, because what is clear at the same time, is that the new government remains, it says, fully signed up to Britains ‘leading role at the Paris climate change summit in December’, and apparently committed to the achievement of the carbon budgets that go along with Britain’s offer (40% reduction greenhouse gas levels over 1990 by 2030, or effectively, the achievement of the fourth carbon budget, presently on its own admission, difficult to do on the basis of present measures). So you might expect some new measures, or at least an indication of which measures will get top billing over the next period.

Well as we know, despite the explicit indications that ‘ action is needed in this parliament to ensure that the pace of emission reductions accelerates whilst supporting economic growth’ from the committee on climate change in its 2015 progress report to parliament, the initial actions of the new government have been to take a machete to a number of support schemes, ostensibly on the grounds that they are too expensive to support and will impact adversely on customers bills.

And the striking thing about the machete-ed measures is that each of them represent, essentially, a different way of changing behaviour in a green and lower carbon direction. You might expect a government reviewing what direction it best wants to take in meeting carbon budgets to refine what kind of measures it wants to support – and in effect which measures it believes are most compatible with its philosophy of government and which are not. Measures to change behaviour , we might schematically represent as follows (in descending order of intervention).

  1. Put a tax on ‘ bads ‘ and exempt ‘goods’ so that behaviour changes towards the ‘goods’
  2. Put an obligation on companies to do greener things as part of their operating codes.
  3. Encourage people to invest to save using their own bills by greening their environment or energy use.
  4. Introduce regulations that at minimal cost introduce a largely unnoticed ‘green shift’ in the ways people live.

We can fit each of the machete-ed measures  into this:

  • we are no longer going to tax ‘bads’ (1) since the collapse of the climate change levy doesn’t perversely save any consumers money: it merely equalises payments across the board into treasury: it is just free money for government, with no behavioural purpose behind it.
  • We aren’t going to place obligations on companies (2) with the constraint on the levy control framework and the end of renewable obligation to advantage renewables.
  • We are not going to encourage people anymore to invest in their own energy savings by using the power of their present bills (3) with the ending of the Green deal.
  • And finally, we are not even going to introduce relatively mild and cost effective regulation (4) that moves the market in a more energy efficient and lower carbon direction by requiring a general framework for building homes that are increasingly energy mean in their operation.

So that leaves a rather frightening conclusion. If we believe that the government is sincere in maintaining its carbon change objectives and it’s willingness to address the consequences of its own carbon budget commitments, then at some stage it will have to introduce measures to change behaviour or investment patterns that look rather like the measures they have just abandoned. Alternatively it may now be that the single and sole mechanism they think will bring is change about is….the market. And since Lord Stern, as I remember notably described climate change as ‘ the worlds biggest market failure’ I’ m not sure right now that it is a strategy that will reliably deliver.

When is March 2016 not March 2016?

Well, look, what can I say other than sorry? You might have noticed (if noticing things not happening can be bracketed in the same way as things happening) that nothing has emanated from Alan’s Energy Blog since…er…the beginning of February. A small interruption in the shape of a particularly enervating General election campaign did occur it is true, but that is really no substantive excuse for not putting stuff out.

So for all my several avid readers, here’s something new at last, and to achieve this, I thought I would proceed with an obscurity. Well more a starry eyed question, really, and that is this: Has the Secretary of State actually stopped the giving out of Renewable Obligation certificates after March 2016 by saying in a written statement that there will be no RO certificates after that date? There has, of course been a justifiable storm, on the day of the statement, about its effect: a good piece by Julie Elliot MP in Business Green  sets out just what damage such a knee jerk, ill thought out piece of reverse engineering will do to the wind industry and to the cost of renewables. I concur with all that, but my question is, in the rush to produce this handbrake turn has the Sec of State actually done what she thinks she has?
I ask this because there is, in the nether regions of her statement, this curious phrase:

‘I am therefore announcing today that we will be introducing primary legislation to
close the RO to new onshore wind from 1st April 2016 – a year earlier than planned.’

So the Minister is going to legislate to close entry: which I guess she will have to do because there exists already a piece of secondary legislation which states that no new RO certificates are to be issued for electricity generation after 31st March 2017. Or to put it another way; ROs WILL be issued up until that date. The secondary legislation in question is the Renewables Obligation closure Order 2014 (no. 2388) which seems to have been passed in a bit of a panic by then DECC minister Matthew Hancock to ensure that the RO really did close in 2017: and to make sure it did he (unusually) put the date on the face of the legislation. And there it is; no ifs, no buts, no ministerial discretion, the RO closes on 31st March 2017.

So let’s then think for a moment about the passage of the legislation – Primary legislation, that is, – that the minister has in mind. That will be the forthcoming Energy Bill rostered to appear in this session. Let us say it starts its passage through Parliament in late autumn: after all its stages it will probably get royal assent ..ooh around next summer, after the magic date of April 2016 has passed, but obviously, before the former magic date of March 2017 has appeared. And meanwhile, as far as I can see the RO closure Order of 2014 chugs on until such time as it doesn’t. So maybe we’ll find ourselves in the difficult situation of having to give out ROs in the spring or summer of 2016 because the law says we have to, even if the Minister says we don’t. I wonder if that has been budgeted for? Just asking.

Spot the connection: a) Post 2020 renewables targets b) Vestas c) Isle of Wight.

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(….wrong)

 OK, here’s the easy bit of the answer. Vestas the Wind turbine manufacturers, (not the defunct range of freeze-dried curries) have a substantial turbine R and D facility on the Isle of Wight.  Anyone with a shortish memory will recall that they had a blade manufacturing factory on the Island once, making small to medium sized blades, but this closed. Vestas didn’t exactly go away, however: they instead invested some £50 million in the now operational R and D centre. I went and had a good look at the centre last week – and its description as an R and D centre somewhat belies its actual status. True this is where Vestas are undertaking detailed research and development on the next generation of blades, but they also have, in effect a fully functioning single line production facility – except, of course it isn’t producing anything in terms of a production line.  It is producing blades and moulds, however and is testing them: it probably qualifies therefore (and this is a bit startling) as the only place in the UK currently producing offshore turbine components:  and they are very large indeed, and primarily looking at developing the next generation of large offshore 80m blade machines. Here’s some pictures of a very small me, to give you some idea of that size.

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The problem – and the final connection – then is this. We are still claiming, as a Country to have a ‘world lead’ in offshore wind, which may be true in terms of deployment, but right now , as we go into the deployment of the round three wind off shore wind farm licences, we have virtually no indigenous supply chain to give value added in terms of UK jobs, skills and development to the process of deployment – and the optimism surrounding the establishment of such facilities (Siemens developing in Hull following the Ports infrastructure  funding competition, for example) is slipping away as no-one actually comes and sets up the facilities in the UK that we will need.

In part, this is down to the upfront investment that is needed for new frontiers of technology: there will probably have to be a number of £50 million slugs of cash deployed to get each element of components for next generation offshore established in the UK – or otherwise, we could resolve supply issues for deployment by waiting in the queue for overseas manufactured components, probably at eventual greater cost.

And if of course we don’t do something soon about giving those sort of investors some degree of clarity about whether they will have any market for such components after 2020, then the likelihood is that they will – nowish – be taking decisions to put their £50 million slugs of investment elsewhere –  not least because , with very large components such as those they are testing at Vestas, there is an advantage in building close to deployment.

So when we are next debating whether to provide 2030 renewable targets, or looking to evade commitments on offshore wind deployment post 2020, then we might think of Vestas on the Isle of Wight. This could be a substantial production line for 80m turbines ready to go onto the Dogger Bank and elsewhere. Or there might not be: Vestas certainly are not going to manufacture blades on the Isle of Wight to satisfy future Chinese offshore development.  What there will be post 2020 is a very nice large shed available in a picturesque location: ideal perhaps as a heritage centre to display the products of a once promising UK wind turbine industry.

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