Policy Exchange panel suggests Rudd’s paragon of boredom is some way off
Last year, UK Energy Secretary Amber Rudd said she wants the country’s energy policy to be boring. It’s hardly surprising – the backdrop to the sector is far from dull and presents multifarious challenges.
Energy is an incendiary issue. The global population looks set to top nine billion by 2050, meaning energy demand will increase exponentially. Switching to low-carbon energy systems and powering down fossil fuels, while scaling up renewable solutions, is top of the agenda.
Last year’s Paris Agreement reinforced the commitment to decarbonisation, while the advancement of clean technologies continues to defy expectations. At the same time, global oil and gas markets have adjusted to a “new normal” of low prices, posing challenges both to the decarbonisation agenda and to the future of North Sea oil and gas. Meanwhile, energy security remains a critical issue with the UK facing relatively tight power capacity margins and the Government stepping in to secure capacity. There is also the ongoing challenge of affordability, with policy decisions increasingly scrutinised and the low carbon budget effectively spent to 2020.
A recent panel event hosted by Policy Exchange explored some of these issues. Themed “Staying the course: managing challenges to UK energy policy”, the event focused on the UK Government’s achievements, challenges and next steps in working towards a lower carbon future. The debate provided some compelling commentary from a strong panel of speakers:
Lord Howell of Guildford, former Secretary of State for Energy
Angus MacNeil MP, Chair of the Energy and Climate Change Committee
Irene Rummelhoff, Executive Vice President, Statoil
Dr John Feddersen, CEO, Aurora Energy Research
We’ve summarised the highlights below.
Lord Howell was highly critical of policies implemented to tackle climate change:
- Despite oil recently breaking the $50 a barrel mark, he predicts a continuation of weak oil and gas prices
- He said that neither EU nor UK energy policies work:
- Affordability failing, e.g. steel industry energy costs 40% higher in UK than in Germany
- Questions about the reliability and deliverability of capacity
- EIA projects a 48% rise in energy consumption by 2040
- He believes the goals are right but we’re on the wrong path
- Considers blind adherence to current policy very dangerous and a bad example for China, India and the United States
- Noted China’s recent investment in 144 coal power stations
- Suggested four-part approach:
- Invest in technology and bring down the cost of renewables
- Bring down the cost of nuclear
- Make improvements in efficiency and battery technology
- Make coal cleaner and continue to use it – “we need to be realistic”
Angus McNeill gave an overview of discussions held at the Commons Energy and Climate Change Select Committee, noting:
- A recent report from Chatham House says that Shell and BP must make drastic changes to their business models
- Disappointment at the abandonment of the carbon capture and storage (CCS) competition and pointed to Canada, where the Boundary Dam Carbon Capture Project is underway
- Uncertainty over Hinckley and its viability
- The stop-start nature of UK energy policy
- The Committee’s enthusiasm for energy storage, on which California is currently leading, but the need for UK regulations to change
Irene Rummelhoff of Statoil said that there needs to be an overhaul of Statoil’s business model and focused on the company’s decarbonisation offering:
- Statoil provides the UK with 60% of its gas
- The switch from coal to gas needs to be pushed through as this “immediately halves” CO2 emissions
- Pushed Statoil’s offshore wind credentials and praised the UK as the world leader in offshore wind
- Through the Hywind Scotland project, Statoil is building the world’s largest floating wind farm in the North Sea off the coast of Peterhead
- Highlighted Statoil’s CCS projects in the North Sea
John Feddersen focused on the UK electricity market:
- Believes that the UK Government inherited good policies that were poorly implemented
- Thinks that difficult decisions must be made:
- Work out who should be paying for the transmission grid to encourage diversity of technologies
- How does the Department for Energy and Climate Change view the available technologies? Requires a rational discussion
- Security of supply must be taken off the table as a political issue
- What data is required for an efficiently functioning system?
Despite a range of insights from some key industry stakeholders, the debate reinforced something we already knew – energy is emotive, complex, always on the political and public agenda – and rather than achieving Rudd’s ideal of monotony any time soon, UK energy policy will only get more interesting.