Stephen Hammond is the Conservative MP for Wimbledon.
The energy trilemna of ensuring security of supply, achieving our climate change challenges, and keeping prices low for consumers faces all developed nations.
However as North Sea Oil and Gas production is falling, we face the lowest margins for British power systems in a decade, and price paths for global commodities are uncertain, the problem for the UK is acute.
The Department for Energy and Climate Change (DECC) has pursued an entirely sensible policy of promoting a diverse mix of energy source. New nuclear, additional renewables, and Carbon Capture and Storage (CCS) all require subsidy, which inevitably adds to energy bills.
It also implies, potentially, large increases in expenditure by the Government under the Levy Control Framework, which caps the amount spent on “ green energy”.
The Solar Trade Association recently produced its’ “Solar Independence Plan”. This rightly praises the achievements of the Government as solar capacity has risen from a negligible amount to 2010 to 5.7GW today, which powers 1.7m homes in our country.
The STA state that restructuring Feed In Tariffs has the potential to make a huge impact on the amount of solar installed – clearly this is true in our countr,y as FITs have led to a vast increase in capacity installed today.
In more recent years, as there have been falls in tariffs and investment by the industry in efficient supply chains and installation methods, the cost of producing electricity from solar is declining faster than any other generation technology.
A key plank of the Solar Independence Plan is to “ remove the need for solar subsidies”. Hurrah! A recognition that as an industry secures private investment the need for public support should decline.
Full marks to the STA for not being subsidy junkies. So as the Government launched a consultation on the reduction of FITs on August 27th.
Is the everyone happy? Well judged by my email box and post bag, the answer is a resounding no.
Many of the people complaining are not the usual 38 degree moaners but sensible people, including many from industry.
The consultation is proposing a cut in Feed In Tariffs from 12p to 1.7p, which attempts to reduce all subsidy by 2020.
Although everyone accepts and wants to reduce subsidy to zero , the reason why this proposal is inspiring so much opposition is that it could just undo all the good work done and kill the industry.
Despite the evidence being relatively recent, all international data suggests that a cut of this scale would substantially reduce installation and production back to the negligible levels of pre-2010.
So is there a solution? In the spirit of Lord Young – who not only identified problems but provided solutions – here goes.
In the UK we are all “passive consumers” of electricity. Distant power stations with a multitude of wires and pipes supply us with the energy we need at a cost we are given . But there is the opportunity for the UK to create a brave new world of empowered consumers and decentralised energy.
As a former transport minister, I know that technology advances in lithium ore battery storage could have the capacity to transform the electric car .This is the game changer as energy storage can take any number of forms, not just electric cars but heat systems, for example.
The cost of installing domestic solar panels is dropping and could continue to do so. Smart meters are about to be rolled out to every home and business in the UK by 2020. So put them all together, and you have decentralised energy .
What does decentralised energy really mean, and how will it work for you and me?
Our homes will become smart homes. Every house could have a PV solar panel linked to their hot water system and smart meter. This would allow us to store solar energy, but equally importantly we will set our at least a part of our own demand in line with our own generation.
Furthermore there would be the potential for us to export energy back into the Grid, this is also known as net metering.
A solution, or just a dream? Definitely the former, and here’s how we reach it.
Firstly, if the Government were to cut FIT from 12p not to 1.7p but to 4p for the next two years, to the lower level for the next two and then phase it out.
Secondly if the Government were to introduce net metering, as is internationally accepted, as it phases out the FIT scheme .
Lastly, if the Government were to initiate a term-limited subsidy/discount scheme for the introduction of battery technologies alongside and linked to solar installation.
If one adds all those “ifs “ together, and realises all of this can be done within the Levy Control Framework, then by 2020 we could have a portion of our clean energy subsidy-free, lowering the cost for the customer and helping to meet our climate change commitments .
A Conservative solution led by innovation, not reliant on the State.