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UK swims against the green tide

Experts fear that Cameron and co are undermining the renewable energy sector just as it is most needed in the wake of the Paris deal. Can private initiatives fill the gap, asks Nick Hughes.

It has been a rollercoaster few months for UK suppliers of renewable energy. In December, the historic agreement at COP21 in Paris to limit a rise in average global temperature to below 2oC seemed to mark the passing of

the energy baton from fossil fuels to clean sources of power. Yet, concurrently, the UK government has been embarking on a programme of policy making that many feel is undermining the transition to a green energy supply.

At a time when many businesses, including those in the food industry, are seeking to reduce their reliance on fossil fuels by switching to greener forms of energy, the ripple effect of recent political events could be felt well into the future.

The Conservative government has either scrapped or scaled back more than a dozen climate policies over the last six months including cuts in subsidies for solar and onshore wind and a watering down of energy efficiency initiatives.

The effects, say experts, could be chilling for the clean energy sector. Britain’s renewables industry is about to “fall off a cliff” just at the point it would otherwise be coming into its own, according to recent research carried out by Bloomberg for the Independent. The research forecasts that, having experienced record levels of investment in 2015, over the next five years

the UK will lose at least 1 gigawatt of renewable energy generation, enough to power 660,000 homes. It predicts that after 2020, the new renewables infrastructure will collapse to almost nothing because of a lack of investment.

Despite the gloomy predictions the UK government has been resolute in its defence of its policies, repeating the line that its priority is to provide clean and secure energy while keeping bills down and that it is helping new technologies stand on their own two feet while meeting its renewables commitments.

The evidence is in the government’s favour, up to a point. However, while the UK is indeed on track to hit its targets under the first three carbon budgets that run until 2022, the independent Committee on Climate Change (CCC) warned last summer that under current policies the UK is likely to miss its fourth carbon budget, a scenario that doesn’t take into account recent policy changes.

For the renewables industry, there is a sense that the rug has been pulled from under its feet at the most critical moment. “Before the government changed the policy goalposts, onshore wind and solar were on track to be the cheapest sources of UK power with the potential to be subsidy-free by 2020,” points out Juliet Davenport, the chief executive of green energy supplier Good Energy.

Even businesses without a direct interest in the success of the renewables sector are expressing concern that the certainty and security needed for companies to invest in green energy is being undermined.

In the aftermath of the government’s renewables announcements, the CBI’s director general, John Cridland, spoke publicly and pointedly about the “worrying signal” the change in direction gave to businesses. His concerns were echoed by the Unilever chief executive, Paul Polman, who talked about cuts to wind and solar subsidies sending “the wrong signal” to business in a BBC interview before the Paris talks.

Not long after Cridland’s intervention, the CBI published the results of
a survey showing a fear among businesses that policy changes are putting energy investment at risk. Almost three-quarters of respondents to the CBI/AECOM Infrastructure Survey identified security of energy supply as crucial and 97% felt that investment into a diverse energy mix was vital. Yet 90% of companies surveyed believed investment was being put at risk by short-term policy changes.

The private sector was heavily represented at the COP21 talks and, publicly at least, most businesses were urging national governments to be ambitious. In the event, they got their wish. However, doubts remain about just how individual countries are going to make good on their decarbonisation promises. The final text of COP21 noted that much greater emission reduction efforts would be required in order to keep temperature rises below 2oC than is currently set out in national plans. The implication is that a shift to renewables is fundamental to hitting, and exceeding, this target.

Globally, the shift to a low-carbon economy is already taking place. Last year was a record breaking one for renewable energy with investment up 4% to $329 billion (£230 billion), according to data from Bloomberg. China, in particular, is going great guns for solar, onshore wind and biopower, and growth is also being driven by emerging markets in Latin America and the Asia-Pacific region. However, European investment has dipped well below its peak in 2010/11, partly because of the crash in oil prices and the fall in the price of natural gas due to the US fracking boom.

Yet the pace of change is not nearly fast enough. In the World Economic Forum’s list of top global risks for 2016 a failure of climate change mitigation and adaptation was ranked number one – the first time since the report was published in 2006 that an environmental risk has topped the rankings, pushing issues such as weapons of mass destruction and large-scale involuntary migration into the minor places.

Sensing the urgency of the situation, many forward-thinking businesses are pressing ahead with ambitious energy transition programmes of their own.

RE100 is a global initiative with the aim of engaging, supporting and showcasing influential companies committed to using 100% renewable power. It is convened by the Climate Group in partnership with CDP, and the list of signatories includes major food industry players such as Unilever, Ikea, M&S, Nestlé and Starbucks.

Unilever already purchases 100% renewable energy for all of its factories in Europe and North America and globally has a target to reach 40% renewable energy by 2020 and 100% renewable energy by 2030 through a mix of purchased and self-generated renewables.

The investment community is also, slowly but surely, engaging with the issue. During COP21, a group of 20 institutional investors with assets worth well over £300 billion joined forces to call on more of the world’s largest companies to commit to 100% renewable power by joining the RE100 group. Where investors lead, businesses invariably follow.

On a smaller scale, some of the UK’s more progressive companies are generating their own energy through circular economy approaches. At Unilever’s UK Marmite factory, 18,000 tonnes of solid Marmite waste is converted into methane via an anaerobic digester, which is used to provide 30% of the factory’s thermal energy.

Wyke Farms, meanwhile, has gone a step further and is now supplying a large proportion of Sainsbury’s “green” gas, which makes up 6% of the supermarket’s total gas use. “We source all of our electricity and gas from both solar and biogas, generated from the farm and dairy waste,” says Wyke’s managing director, Rich Clothier. “Supplying customers with gas as well as cheese, taking waste back in return, all forms part of the type of circular approach where everyone is a winner.” Wyke is keen to offer similar opportunities to other businesses committed to addressing their environmental impact.

Whether such initiatives and commitments will be sufficient to keep the UK renewables market moving forward, only time will tell.

A market-based view suggests that with increased demand will come increased supply and ultimately falling prices, regardless of the wider political environment.

Yet governments can enable business change by reducing investment risk and incentivising positive action. If, as it seems, the UK government is intent on taking a back seat in the green energy transition, businesses themselves will need to move in and fill the policy vacuum. The signs are they are doing just that.

When the story of the switch to green energy is told many years from now, the UK government risks finding itself on the wrong side of history.