Tony Lodge is a Research Fellow at the Centre for Policy Studies.  His latest pamphlet, ‘The Atomic Clock – How the Coalition is gambling with Britain’s energy policy’ was published by the CPS earlier this year.

When will the penny drop?  When will the Tories (who should surely know better) realise they were mis-sold a bad Blair policy and cut their losses?  Continuing the expensive ‘greenwash’ with the British people is not only dishonest, but threatens the Party’s reputation for understanding markets and cutting costs for hardworking people.  Maintaining the present approach of supporting impossible and damaging targets threatens Britain’s economic competitiveness, jobs and industrial base.  It also threatens to cost the Party the next election.  Get energy strategy wrong and you will lose; remember Sir Edward Heath?

The Tories need to recall who first designed and agreed to the policy which squeezed the UK into the ill-fitting and anti-market straitjacket labelled ‘decarbonisation’, which has caused energy bills to soar and crucial generating capacity to be closed.

At the 2007 EU Council, Tony Blair committed the UK to meet a staggering 15 per cent of total energy from renewables, up from around 1.2 per cent at the time.   No economic impact assessment was put before Blair (or commissioned) before this draconian and destructive target was agreed.  Prime Ministers would do well to recognise the difference between energy and electricity; if Blair thought he was signing up to 15 per cent of electricity from so called green sources then he was wrong – he had in fact committed the UK to sourcing 35 per cent of electricity from renewables by 2020.

Last year renewables (including biomass) provided less than 11 per cent of UK electricity against coal and gas combined at 70 per cent.  This Blair target has been an expensive disaster for Britain’s homes and industries struggling to pay energy bills.  It could yet become be a national economic crisis as National Grid has warned again this week about blackouts and price spikes.  The political ramifications are obvious.

Why was this allowed to happen?

Blair’s 2007 commitment was quickly followed by the Climate Change Act 2008, which set a legally binding framework for a reduction in greenhouse gas emissions of 34 per centby 2020, based on 1990 levels.

Coupled with this was the Government’s commitment to close over 12GW (gigawatts) of coal and oil power plants by 2015 to meet EU emissions rules.  Despite calls to ignore the EU and place some of this capacity into a reserve ‘back up’, the Coalition has approved the closures.  New proposals to deliver new power plants and grid investments represent the largest intervention in the electricity market since the old nationalised Central Electricity Generating Board was responsible, pre-electricity privatisation.  But these new gas plants remain unbuilt.

More intervention to try and meet targets has resulted with a new and rising unilateral UK price for carbon emissions from power plants, starting at £16 per tonne of CO2 emitted, from April.   This carbon price floor has been introduced despite a much lower carbon price in the rest of Europe.  However, where this tax was supposed to encourage the construction of low carbon power plants, it has merely slapped higher prices on coal and gas plants and therefore pushed up consumers’ bills.  Australia has recently ditched its own high carbon tax following the election of Tony Abbott.  The UK carbon tax will add about £1bn a year to renewables subsidies in 2017.

As well as generous ‘capacity payments’ for back-up power plants to help shadow intermittent  renewables, a new Emissions Performance Standard (EPS) will be introduced to ban new coal plants; irrespective of the coal price being low, particularly as a result of the US shale boom.

If the UK thinks it is leading Europe with environmental best practice then it should look to Holland and Germany, where new large modern coal plants are being completed and more are planned.  These efficient plants will quickly take advantage of record low coal prices as global coal output outstrips demand.

So what should we do?

  • We must drop the pretence that the UK enjoys an electricity market – it doesn’t.  Instead it has created, through decarbonisation targets – a heavily interventionist and subsidy drunk sector which is highly regulated.
  • We should stop building wind turbines.  They are expensive and do not provide electricity on a viable, reliable or economic scale.
  • We should allow and encourage remaining coal plants to bid for ‘capacity payments’ so that they can remain online and support the UK through tight capacity margins in the coming years.
  • We should review and amend the Emission Performance Standard so that new modern coal power plants can be built in the UK, as was proposed at Kingsnorth in Kent by E.ON, three years ago.
  • We should stop subsidizing solar and re-examine subsidies for biomass wood imports which is placing a huge strain on the rail system.  Biomass is trickier to handle than coal and cannot be stored in very large quantities thus requiring a regular flow of daily trains between ports and plants.  Boilers must burn 0.6 tonnes of biomass for each 0.4 tonnes of coal, to produce the same energy.
  • We should develop a shale industry and encourage the development of deep underground coal gasification technology so to utilise vast UK stranded coal reserves.
  • We should seek to deliver as much of the ambition in the Gas Generation Strategy as possible and support the fast construction of new gas fired power stations.
  • We should publish in detail how the Government agreed and justifies its nuclear strike price negotiations with EDF for Hinkley in the interests of accountability, transparency and value for money.
  • We should continue with efforts to improve energy efficiency, an area where DECC enthusiasm is evidence-based and well founded.
  • We should drop the carbon price floor which is hurting energy intensive industry and raising electricity bills;  the UK should enjoy the same carbon prices as the rest of Europe.
  • We should cut the ‘greenwash’ and lies about green jobs.  Redundant shipyards and factories across northern England and Scotland were promised a bounty of marine and wind related manufacturing work generating tens of thousands of jobs.  It wasn’t and isn’t true.
  • We should announce the 2007 Blair pre-crash draconian targets were ill founded and unworkable and the UK is no longer bound by them.
  • We should stop kidding ourselves with the belief that we are setting an example to the world and that this represents some form of cunning diplomatic tool.  Our competitors look at the UK with a combination of bemusement and confusion, as they examine which industries they can lure to their shores – known as ‘carbon leakage’.
  • We should show how a post-crash Britain can be a model to the rest of the world by showing how new sustainable growth is linked to low energy bills.  Who knows, it might just catch on…