The Coalition Effect - Energy Policy and the Coalition

  • Published: March 2015

 

Energy policy and the Coalition[1]

 

 

Dieter Helm

Professor of Energy Policy, University of Oxford

and

Fellow in Economics, New College, Oxford

 

29th September 2014

 

 

 

 

The Coalition came to power with a ready-made energy policy developed under Labour. The Secretary of State was Ed Miliband, and his policy as it played out under the Coalition was to prove the basis of a return to a level of state intervention not seen since the days of the CEGB, British Gas and the nationalised industries. By the general election in 2015, the almost complete U-turn had been completed, abandoning most of the liberalised and competitive structures that had been the hallmark of British energy policy for a quarter of a century.

 

How did a Conservative dominated government come to preside over such a profound reversal to their policy heritage from the Thatcherite years? Why did they allow this to happen? The answers lie in the path dependency, which Labour had created towards ever-greater intervention, and the ceding by the Conservatives of energy policy to the Liberal Democrats as part of the price of Coalition. It was something the Conservatives would come to regret, forcing the Chancellor and his allies to fight a rear-guard action. Worse still, the Coalition was to preside over a big increase in the coal burn, a rise in carbon dioxide emissions in 2013, a political rebellion on prices and come perilously close to provoking a security of supply crisis. No one could describe Coalition energy policy as a success.

 

  1. 1.    The Labour legacy

 

Labour in government had agonised over energy policy. Having reviewed regulation following the 1997 election, there were major energy policy reviews after both the 2001 and the 2005 general elections. The 2001 policy review came after the Royal Commission on Environmental Pollution (RCEP) had recommended a 60% cut in emissions over the next 50 years. The 2005 review was a battle as much about the role of nuclear (which Blair favoured) and finding a way back for coal on security of supply grounds as it was about climate change. The EU put in place a climate change package in 2008 centred on three targets, all adding up to the magic number 20. By 2020, emissions were to be reduced by 20%, renewables were to make up 20% of energy, and energy efficiency would contribute 20% too.

 

Although Britain ended up with a 15% renewables target, the EU directives and the commitments made following the 2000 RCEP report, left the Labour government with a profound problem, which would continue to dog the Coalition. How exactly were all these ambitious targets to be met?

 

Labour’s answer was the Climate Change Act 2008, overwhelmingly supported by all the main parties, creating a set of rolling 5-year carbon budgets, and Energy Market Reform (EMR). The carbon budgets tied government’s hands, as they were meant to do. Short of repealing the Act, there was little wriggle room. The EU Renewables Directive (to meet the 20-20-20 targets) forced through a crash programme in wind and solar power, and eventually biomass.

 

Ed Miliband, in his speech in 2008 on energy policy[2], argued that the market approach was not up to the challenges ahead, and endorsed a much more interventionist approach. In fact he and his successors had little choice. The die was cast by the twin straightjackets of the EU Renewables Directive and the Climate Change Act. Though it was already obvious that Britain faced a substantial challenge to meet the coming energy demands even after the economic crisis cut demand, the 2020 imperatives and the carbon budgets dictated the priorities.

 

In opposition the Conservatives had tried to come to terms with energy policy, and a policy paper[3] was duly produced by the shadow secretary of state, Greg Clark, advocating a more market-orientated approach generally and a more sympathetic approach to nuclear in particular. But much of it was tinkering, moving the tiller a bit towards markets. In any event, nuclear was not included in the EU renewables definition and could not make much impact before 2020.

 

  1. 2.    The Coalition agreement

 

The Liberal Democrats in 2010 were the closest thing Britain had to a mainstream green party. They liked renewables, and prioritised climate change. Wind and solar fitted their political philosophy. Both were local and small scale, and the idea of community-based energy fitted with their ideas about decentralized societies.

 

As with other green parties in Europe, the prize in a Coalition was to be the energy department. The German Greens had taken that path, the Irish Greens followed, and even Hollande’s socialists in France found it convenient to endorse renewables as a way of binding in green votes.

 

There was however one very difficult issue in the Coalition negotiations. The Conservatives were in favour of nuclear, and the Liberal Democrats manifesto was against. Whilst the Liberal Democrats could not fudge the abandonment of their pledge not to support university tuition fees, they found a convenient way to hide the volte-face on nuclear. Chris Huhne, the first Coalition secretary of state for energy and climate change, claimed that he was not opposed in principle to nuclear, but rather he had doubts on economic grounds. Provided nuclear received no public subsidies, the Liberal Democrats would not stand in nuclear’s way. The fact that many in the Liberal Democrats were opposed to nuclear full-stop, as were many in the green NGOs, could be conveniently glossed over. For since Huhne thought nuclear would not be economic, all that was needed to hold the line was to prevent the Coalition from subsidising it (and indeed the Conservatives had said as much in their manifesto on the undesirability of subsidies). If Huhne was right, then there would be no nuclear programme, satisfying all factions in his party. But eventually his party would go much further, embracing nuclear at a party conference in 2013.

 

The rest of the energy policy part of the Coalition agreement was plain sailing, with a heavy endorsement of renewables, and an explicit commitment to introducing a carbon floor price was included. What the agreement meant in practice was that Huhne could press on with renewables, and the George Osborne could push for nuclear. It was an unstable political balancing act.

 

 

  1. 3.    Picking winners and the renewables

 

The balancing act began in earnest with EMR, as it was inherited from Miliband. What Huhne wanted was a way of improving on the Renewables Obligation and the Renewable Obligation Certificates  (ROCs) again inherited from Labour, to expand the ambition and reduce the costs. The Feed –in-Tariffs  (FiTs) were the way to do this, since instead of being paid both for the ROCs and receiving the wholesale electricity price as well, renewables would now go onto fixed price tariffs. These would be related to the wholesale price by a contract for difference (CfD), bringing a massive amount of complexity neither necessary nor with much effect.  The important point was that FiTs fixed the price the renewables got.

 

For Osborne and the Conservatives the move from ROCs to FiTs had a special appeal. The ROCs were for renewables only. FiTs could include other low carbon technologies, and crucially nuclear. Both Huhne and Osborne could have what they wanted. Except Osborne was not prepared for customers to write an open ended check for the wind farms and solar panels, and he inherited a policy instrument which would in time allow him to tighten the noose around the renewables. It was called the Levy Control Mechanism (LCM), and it fixed the total amount of subsidy over and above the wholesale price.[4]

 

Few at the time understood the effects this would eventually have, because it was a conventional assumption of the renewables lobby that the oil and gas prices were going to go up significantly. Miliband, Huhne and his successor Ed Davey all agreed. And since they “knew” that oil and gas prices would rise sharply, they could complacently assume that by around 2020 wind and solar would be cost competitive with the fossil fuel generators, and hence the subsidies could wither away. Unlike the fossil fuel dependent United States, under George Bush, the renewables would they believed usher in an era of competitive and relatively cheaper wind and solar power. Huhne in particular was initially convinced that shale gas would not go far, and in any event would have no effect over here.

 

Knowing the future course of oil and gas prices – and assuming that coal would follow the same path – meant that Huhne could pick certain winners. He basked in the approval that the formidable renewables lobby heaped upon him. It was at least good politics, if terrible economics. But the trouble with knowing the future is that such certainty can be misplaced. Prices can go down as well as up. Despite all the traumas of the Arab Spring in Libya and Egypt, the terrors of Syria, the coming of ISIS in northern Iraq, and the Russian annexation of Crimea and destabilisation of eastern Ukraine, prices remained remarkably stable. In the first half of 2014, gas prices in Europe halved, and later in the year oil prices eased too.

 

This was not in the Liberal Democrat script. Nor was the collapse of coal prices and the increase in coal’s competitiveness against gas. More generally, and perhaps more remarkably, Huhne and Davey, his successor, failed to appreciate that the consequence of the FiTs and falling coal prices would be to push the wholesale price of electricity down, not up. Indeed at late as autumn 2014, Davey was still relying on a DECC forecast doubling of wholesale prices to £92 per megawatt hour by the mid 2020s. This is where the LCM came in. It limited subsidies relative to the wholesale price. If the wholesale price went up, then the constraint would not bind. But if it went down, a yawning gap would open up, and the renewables might be rationed off. Looking ahead, such a collision between the renewable and the LCM looked inevitable. Wholesale prices in northern Europe were much lower – in the middle of 2014 they were around half the British level. Renewables are typically zero marginal cost, receive FiTs and hence can bid in zero to force them onto the system without affecting their revenues. More renewables meant lower wholesale prices. Falling coal gas prices would do the rest. Year by year the potential for the LCM to bind might therefore increase, thereby tightening the Treasury noose around DECC’s subsidies.

 

Neither side was willing to push this to its logical conclusion – that either the LCM or the renewables directive would have to give. They only fixed the LCM for the short term anyway. The impact of nuclear after 2020 was for another, post-election day. Furthermore, the Coalition had discovered biomass, catching up with Europe where biomass was fulfilling half the renewables directive. Converting old coal fired power stations like Tilbury and DRAX would produce lots of electricity. Not all biomass was quite so green as some of its advocates pretended, but this did not matter since the renewables directive had nothing to do with net carbon emissions. It was a directive about promoting specific technologies and biomass was included.

 

Picking winners proved a complex task, not least because there were some obvious economic losers. The Conservatives were noticeably hostile to onshore wind farms, facing a lot of resistance in their rural constituencies to what were widely regarded as blots on the landscape.[5] Offshore wind had the advantage of being at least out of sight. It was however horribly expensive. Even excluding all the costs of its intermittency, and the offshore cabling, it required a subsidy of more than 3 times the wholesale price. The renewables could therefore not be allowed to bid against each other if offshore wind was to have any chance, and each would therefore require its own tailored subsidy. What is more, these subsidies could be repeated fine-tuned, and from time to time the availability of the subsidies could be arbitrarily withdrawn..

 

  1. 4.    Gas, security of supply and the politics of fossil fuels

 

The trouble with intervention is that it is rarely economically or politically static. It is hard to be a bit pregnant, and ministers found that once they were picking the winners and fixing the process on a technology-by-technology basis, they would eventually have to fix them all. This is where gas came in.

 

Huhne had dismissed shale gas as largely irrelevant to Britain, worried about the environmental impacts hydraulic fracturing and stressed the differences between Britain and the US, warning that the UK “should not bet the farm on shale”.[6] The green NGOs were not so sure about shale’s prospects, and they saw shale gas as a serious threat to their favourite renewable technologies. Having got cold feet over biomass (and biofuels), and wobbled over nuclear, the problem for the green NGOs with shale gas was that it might be so cheap as to set a path to reducing carbon in the short run, and undercutting renewables. Switching from coal to gas in the short run is a very effective way of quickly getting emissions down[7]. This is indeed what happened in the US:  the immediate effects were that it had rising oil and gas production, falling gas prices, and broadly falling carbon emissions. In contrast, Britain had falling North Sea production of both oil and gas, higher prices and, with an increasing coal burn, rising emissions. Cheap gas had put paid to the nuclear renaissance in the US that George Bush had encouraged. The fear amongst the NGOs and the renewables lobby was that it might put pay to windmills here.

 

The Coalition discovered that Britain might have lots of shale gas too[8]. But what to do? The green NGOs were strongly opposed, as were rural constituencies in the south where both Coalition parties had votes at stake. Britain is a small crowded island with very different property rights to those of the open US landscapes. It was never going to be easy, but the Chancellor and the Prime Minister were determined to push for a rapid development of Britain’s shale gas. Legislation tried to speed the process, but political consent proved difficult, and in the end Davey, Osborne and Cameron made remarkably little progress. Shale gas was destined to be a post 2015 energy source, if at all.

 

The gas problem was not however just about shale. There was also the problem of gas-fired power stations, which were being mothballed because of a combination of cheap coal and renewables. Just when gas would be needed to plug the gap of the coal closures (forced through by the EU Large Combustion Plant Directive 2001 and its successor the Industrial Emissions Directive 2010), existing gas plant was being taken out, and nothing new was being built, bar a single station at Carrington.

 

Having fixed everything else, DECC now had to fix gas too to keep the lights on. The result was another major intervention – the capacity mechanisms. There would be long term rolling capacity auctions for everything not covered by the FiTs. But again, the market was not to be trusted. Rather than an open auction of all the options, DECC split the auction up into several parts. Old stations which might invest to lengthen their lives would have a short term auction, whilst new (gas) plants would have a separate 15 year auction [9](DECC, 2014a: 100).

 

To this complexity, two more capacity mechanisms had to be added to deal with a more imminent threat to security of supply. In 2013 Ofgem warned that the capacity margin might go as low as 2% in the winter of 2015/16.[10] This was far to close for comfort and the press ran headlines about possible power cuts.  National Grid was given the power to pay large customers to turn off their demand at short notice and to pay some existing power stations to enter a strategic reserve and hence call back mothballed plants.  The resulting set of capacity mechanisms is mind-blowingly complex.

 

With these and the FiTs, and without intending to do so, DECC had become the micro-manager of the electricity system. By 2014 almost every investment in electricity generation would be determined by the government. It had become a central buyer – doing a similar job to that once done by the CEGB.

 

 

 

  1. 5.    The nuclear saga

 

If the FiTs and capacity mechanisms were complex, it can at least be said that the Coalition forced them through, and legislated in the Energy Act 2013 to take sweeping powers. The nuclear saga had in the meantime run on and on. It had all started with Labour’s U-turn from the anti-nuclear politics of Margaret Beckett and Patricia Hewitt, who effectively killed any hope of a nuclear renaissance back in 2003, to the John Hutton’s white paper in 2008.[11] By the time of the 2010 general election, Labour was definitely in favour[12]. So were the Conservatives, but not as noted above the Liberal Democrats. [13]

 

The Coalition agreement required that there be no public subsidy for nuclear, and ways had to be found to meet the letter, if not the spirit, of the undertaking. FiTs got nuclear inside the subsidized technologies, and the wording soon became, no public subsidy relative to the other low carbon technologies. Since virtually anything  - including nuclear –was cost-competitive against offshore wind, this was safer territory. But of course they were all subsidised, and nuclear could never – and had never – survived in a purely private market. Its risks and liabilities are not ones that admit of a limited liability company, and the long construction and operational lives require long term government-backed contacts. And so it proved.

 

Building a new nuclear power station requires a lengthy, complex and expensive process just to get to the starting line. In 2009, Labour had auctioned a number of sites for future developments near existing nuclear stations. Replicating the approach taken in the 1970s,[14] the Coalition pursued the idea that there should be competing nuclear power stations. So it encouraged the formation of several consortia. EDF was always on the lead, but Westinghouse and Hitachi were also in the new nuclear game, and a number of European energy utilities fancied their chances in the new British nuclear market. EON and RWE teamed up, Iberdrola and GDF joined in, and soon new build nuclear proposals mushroomed.

 

The early enthusiasm proved misplaced for the German companies, and the nuclear exit post-Fukushima in Germany and other European countries led to a reappraisal. EDF remained true to its ambitions and pushed on with its Hinkley twin reactor proposal. Its partner Centrica pulled out, leaving it dependent on the Chinese to carry the project forward. The Coalition declined the possibility of directly investing, to create a French-British nuclear industrial partnership.

 

Instead the Coalition offered Hinkley a FiT contract for 35 years, and a Treasury guarantee over the finance for construction. The project would as a result earn around a 10% real rate of return, despite the government guarantees. Just over 3 GWs of new nuclear generation would, as a result, cost around £16 billion. Unsurprisingly the European Commission decided to investigate the contract on state aids grounds, as indeed it did for other finance guarantees (such as that extended to DRAX) and for the EMR subsidies and capacity mechanisms more generally, though with limited effect.

 

After four years, the Coalition was edging towards an agreement that would stick, and then it would be left to EDF to deliver. The initial starting date for generation in 2017 had by then been pushed back to 2022 at the earliest. As for the rest of the nuclear new build programme, others are pursuing their particular technologies with Westinghouse and Hitachi working their ways forward towards regulatory approvals for designs and eventually their own FiTs. The Coalition is on course to repeat the timescale of the last major programme of 10 new reactors announced in the House of Commons in 1979,[15] then to be carried out by the state-owned CEGB. In that case only one reactor, Sizewell B, came online 14 years later. In the case of Hinkley, setting the starting date back with Hutton’s white paper in 2008 would mean that Hinkley might come online 14 years later too. Whether any others follow remains to be seen – as indeed does the completion of Hinkley.

 

  1. 6.    The great price and tax rebellion

 

Whilst the renewables programme continued to be rolled out, so too did the consequent levies to pay for all the interventions.  Huhne and Davey were however unconcerned about the impact on consumer bills for two reasons. First, as noted, they knew that fossil fuel prices were going to go up, thus rendering their favoured technologies eventually economic. Electricity might end up expensive but it would, they were sure, be relatively cheap even if absolutely more expensive. Second, and this was their ace card, they were convinced that energy efficiency would go up so much as a result of their policies, that although the unit price of electricity would go up, the number of units demanded would go down. Davey therefore confidently predicted that bills would be 11% lower relative to business-as-usual as a result by 2020. [16]Energy was going to be both greener and relatively cheaper. The muddle over energy efficiency was profound, shared by all the parties, and common across Europe. All think that the demand for energy is going to keep on going down.

 

It was taken as given that there were enormous opportunities to improve energy efficiency, and the Coalition was especially keen to promote it. They inherited a number of schemes from Labour, including the Carbon Reduction Commitments, the Climate Change Agreements and the Carbon Emission Reduction Target. The centrepiece of the Coalition’s efforts was to be the Green Deal. This was to be a win-win-win policy. Customers would get lower bills, 250,000 jobs would be created, and the renewables costs could be absorbed without a relative bill increase. Huhne described the Green Deal as “a massive new business opportunity which has the potential to support up to a quarter of a million jobs as part of our third industrial revolution” [17].

 

The Green Deal was designed on the assumption that this would all have positive returns to customers. Therefore they could borrow and get repaid in lower bills. The innovation was to tie the loan to the house rather than the individual current occupiers. A complex implementation architecture was put in place. There would be energy assessments by certified assessors, there would by loans, and the work would be carried out by approved contractors. So confident was DECC that this would prove an economic bonanza that there was much hype about street-by-street energy efficiency upgrading.

 

The reality proved soberingly different. Take up was very low, with only 3,234 Green Deal plans in progress at the end of June 2014, of which 1,587 had been fully completed [18]. The problems lay with the underlying assumptions. Just as Huhne and Davey “knew” that fossil fuel prices were going up, they “knew” that there were a vast number of positive net present value energy efficiency investments.  But they were not: once the full costs of refitting the aging British housing stock were taken into account, and the 8% return demanded for the loans, it looked very different. Energy efficiency policy gradually drifted back to being a subsidised activity targeted primarily at the poor and paid for by levies on all customs, in particular the Climate Change Levy, off the back of utility obligations. The main effect came, predictably, from higher energy prices, which increased the economic returns to energy efficiency measures, not the Green Deal.

 

Alongside the Green Deal, the Coalition pursued smart metering, and set ambitious targets for installing smart meters in all houses by 2020. The trouble here was again one of hype. Central planning of a large-scale roll out programme was based upon the assumption that DECC knew the best way of doing this. In practice it was very vulnerable to lobbying by companies that wanted to use the meters to capture and hold customers. Centrica led the way, as it had on the Green Deal, as part of its strategy of expanding its household services business.

 

The results have not been good. DECC picked a central Data and Communications Company (DCC).  But, as with the renewables picking technologies was not an area government had a comparative advantage especially in an areas experiencing rapid technical change. There were also significant data related issues, notably privacy and data access. Unsurprisingly, the Public Accounts Committee found in late 2014 that the programme was not likely to yield the consumer benefits DECC has predicted, and that it was seriously flawed.[19]

 

The Green Deal and smart meters made little or no difference to prices. One additional policy intervention made matters worse on the industrial side – the carbon floor price. Whilst there is a very powerful case for a carbon tax over an emissions trading scheme like the EU Emissions Trading Scheme (EUETS), the Coalition faced the fact that the EUETS was here to stay. It produced a very low price, partly because the EU target of 20% emissions reduction proved easy to meet as the economic crisis bit hard into European energy demand, and because of de-industrialisation. But the Coalition had endorsed Labour’s unilateral national carbon target under the Climate Change Act. So the low EUETS carbon price was a problem, and a floor price of carbon, gradually rising over time, would ensure that the aggregate carbon price would bind on company decisions.

 

The carbon floor price provoked significant hostile lobbying from industry, arguing that it did not achieve its objectives as production was displaced to the EU. In effect, industry argued that carbon price arbitrage would take place. However the fact that industry was right was less an argument against the floor price of carbon and more one against the unilateral carbon target. It was this target which drove up British costs relative to Europe, and the floor price was merely the messenger. This could not of course be admitted by a Coalition wedded to its “climate change leadership”,  and repealing the Climate Change Act was unthinkable. Thus the Chancellor bowed to the industrial lobbying and capped the carbon price at £18 until 2020. The politics of prices would not however go away, and as the policies – the Green Deal, smart meters and the carbon floor price – all failed to deliver lower prices, the Opposition jumped in and proposed a price freeze.

 

  1. 7.    The politics of prices and competition

 

As it became more and more apparent that the Coalition’s energy policy could not produce the cheap energy it promised, consumers took note. They began to rebel, as opinion surveys kept showing energy bills were a high priority. The government was forced onto the back foot by a popularist move by the Labour leader. Miliband promised at his party conference in autumn 2013 that: “if we win the election 2015 the next Labour government will freeze gas and electricity prices until the start of 2017. Your bills will not rise. It will benefit millions of families and millions of businesses. That's what I mean by a government that fights for you”.

 

Miliband’s move was a long time coming. Electricity prices had been a focus of political attention through the recession. The Prime Minister intervened early on to demand that everyone was put on the cheapest tariff, showing a remarkable naivety about how competition and markets worked. If ever there was a proposal to kill customer switching and stop the search for tariffs shaped for the different customer needs, this was it. The regulator, OFGEM joined it, trying on the one hand to increase switching and on the other confine the suppliers to just 4 types of tariff, and in the meantime exempting small competitors from having to pass through some of the policy levies. The politicians and the regulator had finally rigged the market. It made good politics and very bad economics.

 

When Miliband made his price freeze announcement, the Coalition government reeled as a result of this overwhelmingly popular policy. It took two tracks. First, it shifted some green levies, such as those financing the Energy Company Obligation, from customers to the taxpayer, announcing a £50 price reduction. Second, it joined the scapegoating game of blaming the incumbent Big 6 companies. It became open season on their executives and the regulator joined in effectively demanding price reductions. After endless “probes” into the electricity and gas markets, OFGEM referred the industry to the Competition and Markets Authority (CMA), on grounds of the loss of public confidence rather than any hard evidence of market abuse or discrimination. The companies had been tried in the court of the media, and they had the misfortune to have to pass on the levies and policy costs to their customers.  Having knocked the stuffing out of competition, the government and the Opposition now demanded that the incumbents prove they were behaving competitively. It was politically convenient that this inquiry would span the coming general election, and hence kick into touch a difficult problem. The companies could be politically assumed to be “guilty” without the inconvenient facts being revealed by the CMA in advance of the election.

 

 

 

 

  1. 9.    An unsustainable outcome

 

An initial audit of the Coalition’s energy policy makes very grim reading. It had failed on all fronts in trying to achieve its stated objectives, despite an economic depression that cut demand and should have given it a comfortable breathing space. Not that this is the impression given by Davey and DECC. On the contrary they think it is a roaring success, and that it shows that competitive markets are not only working but that the Coalition’s policies all along have been market orientated. Davey proclaimed as late as July 2014 that Britain had the world’s leading competitive low carbon market and was still convinced that the results would be more security and competitiveness too. It was as if there were two parallel universes – one in which carbon emissions are rising, the coal burn has gone up, and the capacity margin might fall to 2% within a year or two; and the other in which emissions were falling, the British energy market was one of the most secure in the world, and customer prices were falling.

 

The problem any government committed to spinning a message based upon underlying “certainties” has is that however inconvenient, the facts will not go away. Stuck in a mid 2000s paradigm, with its own internal logic, these inconvenient facts have kept forcing the Coalition to redouble its efforts. It has been dragged into one intervention after another, with the result that the emerging energy sector has metamorphosed into something very different – a central buyer and increasingly central planning model.

 

Though most of the blame lies with those who controlled energy policy at DECC - the Liberal Democrats and their Labour predecessors - it remains a mystery as to why the Conservatives acquiesced in such a profoundly non-market transformation. One explanation is that they thought this a price worth paying for forming the government and staying in power. Another is a cynical one that the Conservatives thought that the Liberal Democrats would get the blame. A third is that the Conservatives were not really in favour of competitive energy markets either, as witnessed in their determination to drive the nuclear programme forward. Whichever explanation is correct – and probably all three have some force – the result is that Britain’s energy market is not on a convincing low carbon path, and faces customer revolt. It will be left to a future government to have the political courage to decide how far it wants customers and taxpayers to pay for some of the most expensive technologies for making marginal carbon reductions.

 

.



[1] Research assistance from Andrea Caflisch is gratefully acknowledged. All errors remain mine.

[2] The Rise and Fall and Rise Again of a Department of Energy. Lecture by Miliband, Imperial College, London, 9 December 2008.

 

[3] Conservative Party (2010) Rebuilding Security: Conservative Energy Policy for an uncertain world.

[4] HM Treasury, Control framework for DECC levy-funded spending, March 2011

[5] See for example the letter to the PM from Conservative backbenchers, Heaton-Harris et al., 2012.

[6] Huhne, C. (2012). “Britain can’t afford to bet its future on shale gas – wind turbines are here to stay”. Telegraph, 8 November. Available at: http://www.telegraph.co.uk/earth/energy/8877214/Britain-cant-afford-to-bet-its-future-on-shale-gas-wind-turbines-are-here-to-stay.html. See also  for Labour’s position, Caroline Flint, The Shale Myth. Prospect, October 2014.

 

[7] See Helm (2012) The Carbon Crunch, Yale University Press, chapter 10

[8] DECC (2013). Next steps for shale gas production. Available at: https://www.gov.uk/government/news/next-steps-for-shale-gas-production.

 

[9] DECC (2014). Implementing Electricity Market Reform (EMR): Finalised policy positions for implementation of EMR. London: DECC. Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/324176/Implementing_Electricity_Market_Reform.pdf.

 

[10] Ofgem (2013). Electricity Capacity Assessment Report 2013. London: Ofgem. Available at: https://www.ofgem.gov.uk/ofgem-publications/75232/electricity-capacity-assessment-report-2013.pdf.

 

[11] Department of Trade and Industry, Energy White Paper, 2003 Our energy future; Department for Business Enterprise and Regulatory Reform, 2008, Meeting the energy challenge: a white paper on nuclear power.

[12] Labour’s manifesto stated, “We have taken the decisions to enable a new generation of nuclear power stations”.

 

[13] The Conservative manifesto included a commitment to “clearing the way for new nuclear power stations – provided they receive no public subsidy” and the Liberal Democrats “reject a new generation of nuclear power stations; based on the evidence nuclear is a far more expensive way of reducing carbon emissions than promoting energy conservation and renewable energy”.

 

[14] See Helm (2014) Energy, the State and the Market: British energy policy since 1979. Oxford University Press.

[15] See again Helm (2004).

[16] DECC (2013). Estimated impacts of energy and climate change policies on energy prices and bills: March 2013. London: DECC. Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/172923/130326_-_Price_and_Bill_Impacts_Report_Final.pdf.

 

[17] Department of Energy and Climate Change (2010). Green Deal to create green jobs. Available at: https://www.gov.uk/government/news/green-deal-to-create-green-jobs.

 

[18] DECC (2014). Domestic Green Deal and Energy Company Obligation in Great Britain, Monthly report. London: DECC. Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/332987/monthly_statistical_release_green_deal_and_eco_in_gb_22nd_july.pdf.

 

[19] House of Commons Committee of Public Accounts. Update on preparation for smart metering. September 2014.

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