How can we balance environmental and economic concerns?by Mark Dooley / September 18, 2014 / Leave a comment
This piece is part of our special report on energy policy. To read the first piece in the series, click here. To read the second piece in the series, click here.
Energy policy isn’t easy. It requires government to steer a path through environmental priorities, energy security and job creation, and to do so under an intense media spotlight—“climate change,” “power blackouts” and “plant closure” all make for easy headlines. As we approach a general election, the obstacles in the government’s path are compounded by public attention turning towards the cost of energy for the British consumer.
Where is UK policy taking us? Are we still on a path to a renewable future or has the financial crisis supplied a pretext for revisiting the balance between environmental ethics and economic pragmatism? While the broad framework encouraging development of renewable power remains in place, a number of factors are exposing new renewables projects to a more stringent test of economic viability than has been applied over the last decade. The government is channelling the public mood by forcing capital costs of renewable technologies to meet subsidy levels that are declining over time, while simultaneously introducing competitive auctions to an industry accustomed to regulated subsidies.
Developers large and small are expressing their concern about these changes. This anxiety reflects the expense and effort they undertake to make a project ready for construction (or ready to tender for a government funding regime). These development costs range from several hundred thousand pounds for a solar park, up to £30m for a large offshore wind farm. Unsurprisingly, those developers who have already incurred such expense for a project, expecting a set level of government subsidy, are dismayed to learn that the recovery of their development costs now rests on the outcome of a relatively unknown competitive tender process.
If we take a step back, however, these grievances might be characterised as teething problems as the renewables market makes a necessary stride from infancy towards its teenage years. Certainly the impact of the new regime feels a little retrospective for those carrying legacy development costs (although strictly speaking it is certainly not retrospective), but perhaps it is reasonable to expect the government to find some kind of salve for this.