In the previous post, I reviewed the current controversy about the costs of expanding offshore wind, and the argument made by organisations like Policy Exchange that we could meet our 2020 carbon targets more cheaply simply by bringing in a carbon tax and switching from coal to gas in power generation.
The PEx argument raises a number of challenges. Continue reading
In early 2008, I interviewed the generation portfolio manager (the guy who decided whether to invest in new power stations, and what kind) for one of the Big 6 UK energy companies. In the course of the interview he said something that really struck me – namely that the dilemma the company faced was that they simply didn’t know whether, and how much, the UK public would be willing to pay, 5 to 10 years hence, for renewable energy. It wasn’t necessarily that he thought that they wouldn’t be willing to pay, simply that the company just didn’t know, and that this fundamental uncertainty was a factor weakening the policy arrangements in place to support investment in renewable energy. A company will be highly reluctant to spend hundreds of millions of pounds on investments that could end up stranded and worthless because a support policy collapses in the face of public hostility. For me it was the moment I really understood the meaning of policy credibility. I have since told that story countless times, often to those in the environmental movement, many of whom who believed that the mere existence of a policy is a guarantee of its effectiveness (and its future), but often felt they didn’t get the point, or ignored it.
But the underlying politics is now coming back to bite them in the bum. Continue reading
According to media reports, Morocco is to be the site for the first investment by the Desertec consortium led by German energy firms. We argued earlier this year that the Arab Spring opened up a big opportunity for integrating North African and European energy resources and infrastructures (a shame the UK isn’t showing much interest in this). The obvious question is whether, by shifting from dependence on Russian gas and coal to dependence on North African solar electricity, Europe is not exposing itself to an even greater security of supply risk. After all, while you can store gas and coal, you can’t yet store electricity at scale. Suppose a newly democratic (and Islamist?) Tunisia or Libya decides to close down the interconnectors across the Med? Continue reading