UK energy policy gets more complex, but goes nowhere

Too complex by half. Albert Bridge, CC BY-NC-SA

With floods sweeping the country, energy policy has slipped down the agenda since Labour’s attention-grabbing price freeze policy announcement. And this of course is unfortunate, as energy policy is central to any response to climate change.

A refreshingly sensible view was put forward in a recent lecture given by senior Conservative politician (and former energy minister) Charles Hendry MP at Imperial College. In recent years it often has been painful to watch Conservative politicians speak about energy, facing as they do the difficult task of maintaining that the coalition is committed to being the “greenest ever”, despite considerable evidence to the contrary. But perhaps Hendry is sufficiently senior enough not to worry too much about toeing the line – and thank goodness for that.

Political discussion of energy tends to revolve around what is often called the “trilemma” of energy policy: how to balance the issues of energy security, climate change and affordability. And while Hendry stayed within these topics, he was unafraid to stretch their interpretation beyond the conventional.

He said: “Some people say we have moved too far away from the market, but it was the CEGB (Central Electricity Generating Board) of old that delivered much of the large scale investment which we now rely on, and there are real questions about whether the market can deliver energy security.”

“Energy security” is too often narrowly interpreted as self-sufficiency, but Britain is no longer an island (Hendry joking that “many of my colleagues will be nervous to be told this”). And it has long been true: there are now four electricity interconnects to mainland Europe and Ireland, with more under construction.

Connecting the UK with other countries and sharing energy supplies through supergrids should play a major role in Britain’s future, and the economic view supports this. For example, the proposed link to Iceland would allow the import of its huge geothermal energy potential and others that draw upon the solar energy resources of southern Europe and North Africa would be positive steps for UK energy security and for Europe’s efforts to reduce carbon dioxide emissions.

From the menu of low carbon energy supply options, Hendry said most about renewable energy, pointing out how quickly prices have fallen in recent years, even if this is more a result of Chinese and German leadership than from the UK. Supergrids are part of the solution to renewable energy’s intermittency problem. Another is demand response, in which the retail electricity prices respond in real time to demand and supply, and which has the potential to dramatically increase energy efficiency. A further element is energy storage, a field of technology in which Britain could contribute.

But the devil is in the detail, and Hendry was also frank about some of the difficulties in making policy through a strange mix of targets, legislation and regulation. When the government set out the recent Energy Market Reform policy, he said, “we had no idea how complex it would end up being.”

The sad fact is that current energy policy resembles an elaborate Heath-Robinson machine strapped to a huge, ageing and stubborn elephant. Ever more complex mechanisms and devices are added in an effort to prod and entice the beast in the desired direction, but despite various sticks and carrots the response is unpredictable and often unwanted.

Hendry acknowledged this more clearly than I have ever heard a politician do, describing a situation where “for every mechanism put in place there is a side effect which needs a correction somewhere else.” He bemoaned some of the complexities of making policy, such as the importance given to economic impact assessments based on figures of spurious accuracy. When the Chief Scientist for the Department of Energy and Climate Change took up the post, Hendry said he was amazed to find there were more than 100 economists in DECC, but not one engineer.

Hendry’s talk provides encouraging evidence that the elephant in the room is gradually being acknowledged. We are inching towards recognition of the need for a radical reshaping of how we conceive and structure our energy markets and how they are regulated. But there remains a long road to travel.

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