The House of Commons Environmental Audit Committee (EAC) has produced a radical set of proposals for ‘accelerating the transition from fossil fuels and securing energy supplies’. On the demand side, it says that a national ‘war effort’ on energy efficiency is required to cut energy bills, reduce emissions and ensure energy security. according to a cross-party committee of MPs.
On energy saving in buildings, it says ‘the current ECO scheme is not delivering anywhere near the numbers of energy efficiency improvements it did at its peak a decade ago. The Government needs to ensure that ECO+ is properly funded to deliver hundreds of thousands if not millions of improvements every year for the remainder of this decade. We recommend that the Government set a target to build capacity in the energy efficiency sector, with an objective to deliver at least 1 million installations a year by 2025 and 2.5 million a year by the end of the decade. The Government should direct the newly-announced Energy Efficiency Taskforce to estimate the extent of additional funding required to achieve such a timetable’.
On the supply side, it says that bold targets are also needed for new renewable expansion including for onshore wind: ‘We recommend that the Government’s proposals establish clear guidelines to provide benefits for local communities in areas that accept onshore wind farms, including potentially reduced electricity bills. The Government should also set a clear ambition to expand its generating capacity from onshore wind by 2035 in line with the goals it has set for other technologies in the British Energy Security Strategy’.
And also for tidal power, so far still mostly undeveloped, but with four new tidal stream projects (40.82 MW in all) having got support in the last CfD round: ‘We recommend that the Government incorporate, as part of the revised net zero strategy to be published by March 2023, an approach to developing tidal and marine energy that includes a stated ambition for the sector set out in gigawatts of generating capacity. The UK should be aiming to generate a significant proportion of its power from these sources by the middle of the 2030s’.
It also wants clarity on Solar PV: ‘We recommend that the Government set out, in its response to this report, its assessment of the likely impact that reducing the classes of land available for ground mounted solar would have on its ability to achieve its own target of 70GW target by 2035’.
So it is pushing quite hard across the board. Ecotricity founder Dale Vince had submitted strong evidence on renewables to the EAC, which it clearly took note of. He said ‘Onshore wind is our cheapest, fastest form of renewable energy and it is currently shut out of the planning system by the Government. That is a real problem. It is a political decision and it does not make any sense, given our need to get to zero carbon and to do it as cost effectively and as quickly as possible. Onshore solar, the field version, not the rooftop version, is as equally fast and cheap, or almost as cheap, as onshore wind and has enormous capacity as well.’ Although he felt that Tidal power would take longer to mature, a view shared by New Civil Engineer, although its reviewer noted the Offshore Renewable Energy Catapult view that 877MW of tidal stream energy could be deployed in the UK by 2035 and 10 GW later.
On the policy support side, the EAC welcomed the Energy Bills Support Scheme and the subsequent Energy Price Guarantee, but noted that ‘currently it will only help eligible households through two winters. It will not deliver the energy efficiency measures which will lead to permanently lower energy bills. We call on the newly announced Energy Efficiency Taskforce to work with the Chancellor to allocate a proportion of the Energy Profits Levy revenue in the current Parliament to increasing energy efficiency investments, targeting these investments at the most vulnerable to lower permanently the costs of heating their homes. This additional investment should also fulfil the Government’s 2019 manifesto commitment to expenditure of £9 billion on energy efficiency in this Parliament’.
The EAC added ‘The tax system should help, not hinder, the transition to a low-carbon economy. The original way in which the Investment Allowance was structured provided a perverse incentive to accelerate investment in high-carbon oil and gas installations at a time when the public policy imperative was to accelerate the transition away from fossil fuels. We welcome the modest change introduced by the Chancellor to limit the 80% Investment Allowance to investment expenditure on upstream decarbonisation, while having significant reservations about the extent of the financial support the Treasury is providing via the Investment Allowance, which the Institute for Fiscal Studies has noted ‘means that North Sea investment will be massively subsidised’ and ‘could lead to loss-making investments being rendered commercial.’
Crucially EAC says ‘The Government is not providing renewable energy generators with the same level of generous tax reliefs for new investment to enhance the UK’s energy security. We recommend that the Treasury examine how a similar low-carbon Investment Allowance could be introduced for electricity producers paying the new temporary tax of 45%.’
The government has two months to respond. There are certainly some policy gaps and oddities to address, with, for example, one wind company, Community Wind, looking to sue the government, claims that the Electricity Generator Levy (EGL) ‘windfall tax’ is having perverse effect of on the renewable energy sector – treating it ‘unfairly disproportionate, discriminatory and adverse to the government’s Net Zero Strategy’. A spokesperson from the Treasury said: ‘This temporary measure is not designed to penalise electricity generators, it is a response to the fact that, as a result of exceptional and unforeseen geopolitical events, some electricity generators are realising extraordinary returns from higher electricity prices. This levy leaves [generators] with a share of the upside they receive at times of high wholesale prices.’ Well will the wind company be happy with that, when, arguably, fossil options are not being hit as hard?
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