Yesterday’s decision to let onshore renewables compete for clean power contracts shows the Prime Minister is willing to spend some of his political capital to get the net zero transition motoring
Is the government serious about the net zero transition? It is the question that has dogged the Conservatives ever since Theresa May signed off on the adoption of the world-leading goal, sparking accusations she was only doing it because she wanted to secure some form of legacy beyond bungled Brexit negotiations.
The reasons for scepticism are well documented and widely-held among many green business types and environmental campaigners. The UK is still – nearly nine months on from adopting the net zero target – technically off track to meet even its non-net zero aligned medium term carbon targets. Fuel duty has been frozen for over a decade, energy efficiency funding remains underpowered, and the government is wedded to plenty of pro-fossil fuel policies. The preparations for the crucial COP26 Climate Summit have been overshadowed by a high profile sacking and below the radar in-fighting. And the Brexit negotiations could still open the door to a dilution of environmental standards, whatever Ministers say the contrary.
Meanwhile, the Conservatives and their allies in the press retain a vocal wing that is virulently opposed to climate action, have scrapped effective climate policies for perceived short term political gain in the past, and are led by a Prime Minister with a reputation for screeching U-turns.
And yet, there are suddenly good reasons to think such scepticism, could be, if not entirely unfounded, then certainly a little overblown.
As I argued during last year’s election campaign Boris Johnson’s commitment to the net zero transition was one of the defining components of his electoral pitch, even if much of the media failed to pick up on it. He may not have given that many speeches, but when he did, he almost invariably hymned the importance of the net zero target, his commitment to delivering it, and the crucial role of clean technologies in driving decarbonisation. It may not have been explicitly spelled out, but the net zero transition was positioned as one of the great animating projects of the post-Brexit Johnson project.
Since last December, nothing has happened to challenge this hypothesis and a lot has happened to reinforce it.
The government has signaled it is to pull forward the phase out date for the sale of petrol and diesel cars to 2035 and could move it earlier still. It has, somewhat belatedly, started to flesh out its COP26 strategy. It has announced plans for England’s first electric bus town, awarded funding for pioneering green hydrogen projects, and maintained a studied neutrality following the Appeal Court’s decision last week that the approval for Heathrow’s third runway was unlawful. It has confirmed sweeping reforms to agricultural subsidies to enhance climate resilience and restore carbon sinks. And it has let it be known it is working on what would likely be the greenest budget yet, featuring a reduction in red diesel tax breaks, renewed energy efficiency support, and much more besides.
All these moves are welcome, but far and away the most significant evidence yet that this government is serious about the net zero transition has come in the form of yesterday’s shock reports – now confirmed – that the government is set to allow onshore wind and solar farms to compete for clean power contracts.
The rationale for letting onshore renewables compete at contract for difference (CfD) auctions is as compelling as it has always been. Opponents of onshore wind farms will cry that billpayers will have to subsidise unreliable and unpopular renewables, but the reality is far removed from their outdated mythologising. CfDs are a very specific form of ‘subsidy’, in so far as they will likely result in lower energy bills.
The reality is that CfDs do what they say on the tin – they are contracts to cover the difference between an agreed strike price and the wholesale power price. If the strike price is lower than the wholesale price, generators pay back. Everyone who works in the onshore wind and solar industry is confident well-located projects will table strike price bids comfortably below the wholesale price. There is modelling to suggest onshore renewables are now so cheap they are the cheapest option for new capacity even when grid balancing costs are considered. One analysis suggested letting onshore wind compete for contracts could knock 10 per cent off consumer bills.
Better still, CfD auctions will have a catalysing effect on the wider onshore renewables sector. By allowing some projects to secure low strike prices backed by government contracts, operators will be able to spread risk across portfolios that also include projects backed by power purchase agreements with corporates and those that intend to use storage capacity to help them sell power on the merchant market.
Meanwhile, all the polling indicates that both renewables and the net zero transition in general remain wildly popular with the public.
And yet, this is still a significant and brave decision from the government. Critics will argue it should have happened four years ago and is simply a belated attempt to correct David Cameron’s short-sighted politicking. But that is to ignore the fact that Johnson will face criticism from his own side for doing the economically and environmentally rational thing. The government will maintain that strict planning rules and improved community engagement will ensure projects are only built where communities want them, primarily in Scotland. But enabling a new wave of onshore wind and solar farms will still enrage some of Johnson’s most fervent political supporters and media cheerleaders.
As over 60 green NGOs again highlighted yesterday, the Johnson administration inevitably has a long way to go to deliver a credible net zero strategy and a successful COP26 Summit. This is a multi-decadal mission. Crucial decisions await on the level of support on offer to new clean power projects, energy efficiency funding, nuclear plans, carbon capture and storage, and – as evidence by the sluggish response to recent flooding – climate resilience. But Number 10’s apparent willingness to spend political capital to revive the onshore renewables industry suggests that it is willing to take some of the hard political decisions required to accelerate the UK’s decarbonisation efforts. Plenty more battles await, but if the green economy can demonstrate that decarbonisation can be delivered in a cost effective manner and with majority public backing, then it seems it has a powerful ally in Downing Street.
A version of this article originally appeared in the BusinessGreen Overnight Briefing email, which is available to all BusinessGreen subscribers.
Source: – Business Green