What have Renewables Ever Done For Us

I few weeks ago I drafted an article defending renewables. It never saw the light of day but I thought I would publish it here.

As a fundamental basis for our economic prosperity, the provision and price of energy is of vital importance. Energy price increases are never good news and will always attract debate, but the focus should be on the long-term. Trying to save a bit of money now only to be faced with much steeper increases in future is not what anyone wants but when we talk about reducing or removing renewable subsidies, in reality that is the direction in which where we are heading. That is why the Chancellor, quite rightly, is expected to maintain the current level of subsidy support under the Renewables Obligation (“RO”) regime when he presents his Autumn Statement. But what is it that we are actually paying for? The media, politicians and energy companies have spent a lot of time in recent weeks debating so-called ‘green levies’, and the use of such broad brush terminology has only served to confuse and cloud the issue.

The impact of green levies on your household costs is currently limited to around £120 per year, or about 10%, of the typical annual gas and electricity bill.  

Some commentators would have us believe that this all supports investment in renewables, particularly wind. That is simply not true.  

When you look at the cost of green levies the biggest single component – at nearly half the total, and possibly doubling next year – is ECO, an energy efficiency scheme.

If politicians want to deliver a meaningful and immediate reduction in energy bills, this is the area to focus on, as the scheme, despite its benefits, is placing too much burden on bill payers.

Another contributor to bills is the carbon floor price. Let's be clear: this is a tax, raising significant sums for the Treasury. It is probably adding only around £5 to your energy bills now, but that could quadruple in the next two years.

The Renewables Obligation scheme accounts for only £29 per household per year. It represents less than one quarter of the total cost of these Government schemes,and less than 3% of the typical energy bill.

This £29 has grown only modestly over the past 11 years, and is set to continue this modest rate of growth over the coming years. Onshore wind – contrary to popular belief – accounts for just one quarter of the total RO cost, so less than 1%of the total gas and electricity bill. Of all the schemes in place, the RO easily delivers the greatest value to the UK. It supports clean, affordable, domestically generated power. It is efficient in that it only provides support when electricity is actually produced and is a valuable driverof job creation.

By the end of 2013, renewable output will exceed 50 Terra watt hours for the first time. At nearly one sixth of total UK power demand, this output  is the equivalent of 7 new CCGTs, which would require an additional 1.7 billion therms of gas imported annually from Russia, the Middle East or Norway. One alternative would be to run our coal stations harder.  This would drive carbon emissions up by around 40 million tonnes and, more importantly, is an unrealistic possibility because the upgrades required for these ageing power stations have already forced several closures, with more to come in the next year or so.

The renewable industry is also serving as a catalyst for regeneration in manufacturing centres such as Humberside, Tyneside and Glasgow. It has contributed significantly to the development of both our energy infrastructure and the economy. It directly employs around 110,000 people in the UK and supports a further 160,000 jobs in its supply chain. It has stimulated academic teaching and research, with at least 12 universities offering renewables-related courses. And the industry has reached a level of maturity now where it offers a valuable source of income for our pensions and savings schemes. 

At £29 per household per year this represents exceptional value. This is £29 that is helping to diversify our energy mix and keep our energy supply secure. It is £29 that  is helping to reduce the impact of wholesale energy prices on consumers and lower our country’s carbon emissions.

We cannot influence wholesale gas prices - the primary reason for rising bills - but we can gradually become less reliant on gas and therefore protect ourselves from increases in bills that will be even less tolerable than they are currently. Renewables can and will rise to this challenge.

The government’s duty is to plan for the long-term prosperity of this country and that means continuing to invest in renewable energy, when the easy thing to do for short-term gain would be to stop. This is the time to keep the faith and invest in an industry that will help protect us from an otherwise inevitable future of rising bills.

Two key pillars of economic development

I gave a speech to the Glasgow dinner of the Institution of Civil Engineers last week and here is the core of the remarks I made.

Energy and engineering have always been closely linked and, indeed, have been two of the key pillars of our economic development over the last three hundred years. It was engineers like Newcomen and our own James Watt who unlocked the secrets of steam power and allowed us to use the energy in our coal that in turn transformed 18th century Britain. Engineers took that unleashed energy and added innovation to age old processes in industries like cotton in Manchester  and ship building here in Glasgow and made Britain the industrial colossus that bestrode the world. Civil engineers used the new availability of non animal 'horse power' , a term incidentally coined by Watt himself,  to shrink the world with canals and railways.

Energy and engineering then unlocked the second revolution in the 19th century. Engineers found out how to extract, distill and  tap into a new source of energy, oil, and then turned their minds to democratising transport with the internal combustion engine. The Civil engineers got into the act by designing and building the road network we are still using today. This transport revolution lasted until well into the twentieth century and it continued to transform our country. North Sea oil, from the 1970s onwards has been a major driver of the Scottish economy and it has placed Aberdeen on the World map. We now take motorways for granted but construction of the M8 only started in 1965, after I was born, and was only finished 33 years ago.

Then during the twentieth century we had a third energy revolution with the coming of the age of electricity. The National Academies of America decided that electricty was the single biggest innovation of the whole century, simply because all other advances in fields such as healthcare and communications depended on the availability of electricity. Building on the work of engineers like Edison, Swann and Westinghouse our immediate predecessors transformed the lives of millions by bringing them light. The civil engineering feats of the hydro engineers of the 1950s and 60s is truly astounding as I witnessed in a 24 hour nonstop trip around the North of Scotland to visit  34 different  hydro power stations this summer. Our modern world is now completely dependent on a reliable power supply as events on Arran and Kintyre earlier this year illustrate. We truly life in an electric age. 

That of course brings us to the 21st century when I believe we need another energy revolution lead by engineering innovation. Why do we need that revolution?

We have to decarbonise our energy production to avoid global climate change that would undermine the security and economic well being we expect for ourselves and our children

We have to reduce our dependency on finite resources like fossil fuels that will get increasingly difficult and expensive to find.

We have to power a digital economy that depends on reliable supplies whilst at the same time make sure that people can afford to pay the bills.

That threefold challenge depends upon us addressing two key areas; how we behave as consumers and citizens and secondly, what we design and build. For obvious reasons I am going to address the second and I can see three areas where the engineering profession needs to come to the rescue of the energy industry.

1. How we produce electricity. Gone are the days of building ever bigger fossil fuel units. The power system of the future will have lots of local and distributed generation sources. Zero carbon energy will be the norm and we need engineers to get the cost premium down, be that in offshore wind or nuclear. We need our universities and R and D firms to look at the next stage in technology again be that in nuclear with fusion or renewables with marine energy.

2. How we distribute energy. Our local power and gas grids, the wires and pipes in your streets, are dumb, it is an analog system. It needs re-engineering to make it fit for the 21st century so that it is self healing, responsive to two way flows of energy from multiple sources and smart in how it operates. A wide spread uptake of electric vehicles will present a major challenge to our grids. Engineering, combined with behavioural economics, will have to give the answers.

3. How we use energy. Here my main message to a group of civil engineers is that our buildings, be they homes, offices, factories or leisure facilities like this hotel have to be an order of magnitude more energy efficient than they are now. Our built environment stock is an international disgrace and that is why fuel poverty is such a British disease. We  need radical and innovative solutions to both what we build now and in the future and how we go about retrofitting our existing buildings.

 I was in the  Royal Society building in London chairing a conference on heat. But I found out something far more interesting. In 1759 one of the Society's top Prizes, the Copley award was won by a gentleman called John Smeaton. He is known as the first civil engineer but the prize was awarded for his work on the extraction of power from water and the wind. a man before his time and he  was only 35 years old. We need people like John Smeaton, young people, to yet again shake up our energy industry and our engineering profession.

If during the industrial revolution engineers unleashed the power of fossil fuels, and during the transport revolution harnessed the power of oil and in the electric revolution realised the power of the grid, we need engineers to unleash, harness and realise the power of zero carbon energy in the 21st century energy revolution.