Brexit: What is the Future of Renewable Energy Now?

Brexit renewables

It’s been called the most seismic political event of the last 40 to 50 years. We went to the polls on Thursday 23rd June, voting whether to stay within or leave the EU. Most pundits, bookies and pollsters said the result would be close but that remain had the edge. Many of us were expecting to wake up the next morning with little having changed. There was nothing to worry about. Really.

By mid-morning, however, David Cameron had resigned and Brexit had pinched the vote by a couple of percent. While half of the nation were rejoicing, the others were staring gloomily into their morning coffees wondering what the future held. We are in unchartered territory. We don’t even have a real Prime Minister to lead us through the coming months of turmoil.

But what does Brexit actually mean for the renewables industry? In a week when the first solar powered plane crossed the Atlantic under the power of the sun, Britain decided to cut political ties with the continent that had helped us bring together a coherent plan to grow the renewable energy industry and reduce our catastrophic impact on the environment. Before you begin to contemplate the UK becoming less involved in the environmental changes that are needed to save our planet, you might like to consider a few things.

First of all, the current Government had already introduced measures that set back the renewables industry in recent times, not least the slashing of Feed in Tariffs for solar. Secondly, the confused strategy in respect of our energy in the UK, as well as the uncertainty that has been created since the referendum was announced, has led to a reduction in investment in this area. Most of our woes to date have been the result of local initiatives, not the EU itself. Coming out may not have that big an effect, at least not in the way we think.

Having said that, nearly three quarters of the legislation for renewables and protecting the environment (including waste disposal and recycling) has come from EU directives. Whether these are part of the ‘unnecessary red tape’ that leavers complained about is difficult to assess. There are certainly those on the Tory side who are not only Eurosceptic but are climate change sceptic as well.

Could we see more focus on fracking? Well, again, that has little or nothing to do with the EU – the Government has been trying to push forward with it against public sentiment for a while now. What might change is if the legislation for objecting to or stalling such projects is tweaked to make it easier to get a licence or comply with new safety regulations.

Should we be fearing the future when it comes to renewables and other environmental protections? Actually, the UK has often gone a lot further than some of our European counterparts to make our world a better place. In fact, we have often led the arguments to get EU legislation and directives in place. The problem we have is that the current Government only wants this to happen if the ‘market allows’.

We probably need to avoid a certain degree of hysteria, stay calm and keep a stiff upper lip and all that British stuff. After all, we are not giving a blank cheque to our leaders and there are plenty of people in the UK to fight the good fight. But it doesn’t help when our media start producing headlines that suggest industries such as fracking are now going to be given free reign. As The Independent wrote recently:

“The current government has repeatedly suggested that it thinks regulation on fracking is too restrictive and has looked to influence Europe to allow oil and gas companies more freedom to undertake the controversial technique.”

So what about solar, wind and other renewable technologies? Much will depend on a lot of other factors which will affect every aspect of the UK. If the stock market does badly, if interest rates rise, if exchange rates crash, if house prices come down, if jobs are lost…of course, that’s looking on the most pessimistic side.

We could, of course, actually be entering a new and more fruitful period of UK history. Climate change and the renewable energy is not just a left wing utopian world view. There are plenty in the centre and on the right who believe that energy security, if not a low carbon future, are key in the next ten to thirty years.

For the moment, until we come out on the other side of this momentous decision, we’re not really going to have a certain idea of what is going to happen. All we can hope for is that our leaders will come together, make the right decisions and lead us towards the light. Nothing much, in that respect, has really changed.

One thing that might give remainers a little cause for optimism is what happened right after the result was announced. David Cameron had said that he would stay on as PM to see the Brexit through and that he would immediately implementing Article 50. He did neither. Instead, he resigned and said that implementing Article 50 would be a job for the next PM. This leaves the decision to quit the EU kicked into the long grass until the end of the summer. That means there could be a few more twists in the referendum plot before we are actually finished.

UN Urges The World To Double Investment Into Green Energy

United Nations

The Paris climate talks in December have been hailed by most as a great breakthrough in reaching global agreement on reducing our reliance on energy produced from fossil fuels. The talks agreed to bring nations together to find ways of holding global warming to no more than 2 degrees Celsius. Whilst this is undoubtedly good news now comes the hard part – to find ways of producing our energy needs from renewable and green sources to match the goal of the agreement.

The agreement on 2 degrees was reached by 196 governments but it also set an aspiration agreement of 1.5 degrees and to produce a net-zero carbon economy in the second half of the century.

However, it is widely recognised that even if all the governments involved in the Paris agreements met their pledges then this would not be enough to hit the agreement’s goal, only achieving a slow-down of global warming to 2.7 degrees.

In the light of this recognition the UN has upped the ante in the issue and called for global business leaders to double their investment into solar and wind energy to £400bn by the year 2020 in order to augment and support investment from governments.

UN Secretary General Ban Ki-moon has said that there needs to be a drastic rethink of our reliance on fossil fuel-based energy production otherwise the agreement reached in Paris would quickly become meaningless. At a recent meeting of UN investors he said that

“I call on the investor community to build on the strong momentum from Paris and seize the opportunities for clean energy growth. I challenge investors to double – at a minimum – their clean energy investments by 2020.” To achieve this, he continues, would require investors to make the shift from “aspiration to action”.

Rachel Kyte, the UN special envoy for sustainable energy, backed Ki-moon by stating that “We had this extraordinary agreement in Paris, we have got points on the horizon. Now we have got to get down to the nitty gritty of long term development of the low carbon economy and that is a lot less sexy in some respects than things negotiated last year.”

It is estimated by the International Energy Agency that the cost of switching from high-polluting power plants to solar and wind electricity generation in order to meet the commitments made at the Paris agreement will cost approximately $16tr by 2030. However, it is argued by some, that this figure is based on the current costs of solar and wind generation infrastructure. These costs have been coming down rapidly for some time as a result of research and investment and look to continue to do so for the foreseeable future if investment is increased further. If this happens then the $16tr figure could well be an overestimation.

Mindy Lubber, President of Ceres, a non-profit organisation advocating for sustainability leadership, said that

“ultimately, global investment portfolios need to shift far more capital to low-carbon business activity and away from risky high-carbon sectors that may perform poorly in the years ahead.”

The Big Energy Subsidy Imbalance that Threatens Renewables

Fossil Fuel Subsedies

Pressure is mounting on the Government ahead of their proposed changes to subsidies for the renewable industry with some heavy hitters voicing their concerns and businesses starting to reconsider their investments in the industry. Slashing support such as the Feed in Tariff is widely seen as a negative move and many are concerned that the Tories are hell bent on stalling the renewables sector, something that will seriously affect our ability as a nation to meet those all-important carbon targets.

How we Currently Subsidise the Renewables Industry

Subsidies for the renewables industry are not funded through direct taxation. They are paid by us, the consumer, through higher electricity bills. The Tories are worried that the support needed to further grow the industry over the coming years will add something in the region of £170 to each of our bills in the lead up to 2020.

End fossil fuel subsidiesThe reason? There has been a higher than expected take up of technologies such as roof top solar panels and this success has, according to the Tories, seen subsidies spiralling out of control. In other words, renewables are more popular than everyone thought they would be and, if we are going to continue with them, we are going to have to pay more through our utility bills.

There is much play in the Government about making hard spending decisions that will reduce the deficit, something that we have all been listening to over the last 5 to 6 years whilst they have been in power. This year alone, the DECC has to find savings of around £70 million within the department. That’s on top of previous reductions under the coalition government.

The problem is that reducing the deficit also relies on us doing good businesses and growing industries such as renewables which provide valuable jobs and boost tax revenue. Cutting them off at the root too early could well see a decline in investment which could then also impact on all the work that has been done so far to reduce the budget deficit.

We may well all want to see a cleaner and more productive energy structure in the UK but the Government are saying we don’t want it at any cost. According to a DECC source in July, before news of the proposed cuts to FiT were announced:

“The public is in favour of action to cut carbon, but not at any cost and the bottom line is that subsidies should help industries get off the ground, not be relied on indefinitely. We’ll continue to meet our environmental commitments and power our economy with clean energy, but in a way that keeps costs under control and doesn’t leave consumers paying over the odds for green projects.”

The Future of Renewables

Let’s be clear: The industry itself is not against eventually reducing subsidies but the speed with which it is being done is potentially damaging and could have a massive impact for many years to come. Yes, we may have to pay more on our utility bills over the next few years with the current way of funding, but we will incur huge price in the next couple of decades if we don’t give renewables a firm enough foundation.

The other question that needs to be answered is why the Government is still providing large subsidies to both the fracking and fossil fuel industries. This is not just a UK problem – the IMF recently came out to say that fossil fuels are being subsidised to the tune of an eye watering $1.9 trillion a year globally. When the Government says that subsidies ‘should not be relied on indefinitely’ it raises the question as to why the fossil fuel industry gets them at all.

Surely the issue is that we should be reducing subsidies to less carbon friendly industries rather than to the renewable sector. The tax breaks and subsidies that the fossil fuel industry enjoy are backed up by the Government view that they also create investment in the UK and produce valuable jobs that boost the economy. The very thing that they do for the renewables industry.

Unfortunately, whilst the subsidy levels for the fossil fuel industry seem incompatible with our green agenda, the simple fact is that it pays a good deal of tax to the country’s coffers. As the Guardian recently reported:

“There is tangible public hunger to tax big corporations, and oil and gas companies do pay a lot of tax: their corporation tax made up nearly a 10th (£4.7bn) of the national total last year. As demands for public spending escalate, the Treasury cannot afford to choke off such an important source.”

If we want to create a renewables industry that works then we need to nurture it as much as possible. The future benefits are huge – energy independence and security, lower bills and a much cleaner environment. The Tories make much of leaving a better legacy to our children. The shame is that they seem to have forgotten this when it comes to green energy.

 

 

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