Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/406126
20 | 31sT OcTObEr - 6Th NOvEmbEr 2014 | UTILITY WEEK Finance & Investment Analysis N ormally, departing cabinet ministers disappear quietly, with any major policy ris during their time in office exposed in a future biography, if at all. Of course, former defence secretary Michael Heseltine was an exception when he stormed out of Number 10 in January 1986 following a major row over the Westland helicopter company with the late Baroness Thatcher. Neither has North Shropshire MP and one-time leather tanner Owen Paterson – sacked as the secretary of state at the Depart- ment for Environment, Food and Rural Affairs (Defra) in this summer's reshuffle – exactly gone quietly. Paterson, who three years ago competed in the multiple-horse 1,000km Mongol Derby, launched a ferocious attack on the climate change and renewables lobby in his recent speech to the Global Warming Policy Foundation. Unquestionably, many of his views are diametrically opposed to those of the Depart- ment of Energy and Climate Change (Decc), headed by the Liberal Democrat, and pow- erful advocate of renewable generation, Ed Davey. Key to Paterson's wide-ranging case is his unshakeable conviction that "current energy policy is a slave to flawed climate action". In particular, he rails against the Climate Change Act that made the European Union's planned 80 per cent cut in greenhouse gases by 2050 – when measured against 1990 – legally binding: the UK is the only country to give this proposal such legislative force. Paterson argues that this Act – which he voted for – should first be suspended, then repealed. Having number-crunched various long- term energy scenarios, Paterson has con- cluded that, once allowance is made for the wide-ranging impact of the 80 per cent cut across the heating, transport and industry sectors, UK electricity generation capacity would need to soar – and effectively become almost zero-carbon. The costs, too, would be enormous. In the short term, the government has belatedly imposed a £7.6 billion annual cap on renew- able subsidies by 2020/21. By 2050, based on an upper-level case scenario for renewable energy plant, Pat- erson has placed a tentative – and highly debatable – cost of more than €3 trillion. It is an astonishing sum. Paterson also argues that Decc's per- sistent forecasting of sharp gas price rises, which has underpinned its "dash for wind" policy, is flawed: its latest 60p per therm forecast is similar to the price in 2011. In terms of onshore wind development, Paterson has described it as a "subsidy- drunk industry" and has claimed it has "devastated landscapes". His attack on its offshore counterpart, whose unit subsidy is more than double, is hardly less visceral. He concludes that "there is a reason we are leaders in this [offshore wind] technology – no other country is quite so foolish as to plough so much public money into it". His treatment of the solar sector is equally scathing. "It's an expensive red herring for this country and today's solar farms are a futile eyesore". And, predictably perhaps, he also tears into biomass, which he argues is not zero carbon. In effect, Paterson has launched a broad- side against the Drax plant conversion pol- icy, whereby vast quantities of wood pellets are to be shipped from the US states of Mis- sissippi and Louisiana to fuel the eponymous plant – at enormous cost. Such views are shared, in part, by some environmentalists. More positively, Paterson identifies three fuel sources that he believes are key to the UK's future energy strategy. First, he waxes lyrical about shale gas, noting that it has been pivotal in slashing US gas prices to a third of those in the UK; he argues, too, that the environmental impact of extracting such abundant resources is far less damaging than many believe. Second, Paterson is a strong advocate of combined heat and power (CHP); in some cases, an efficiency factor of more than 90 per cent has been achieved. CHP has proved successful in many eastern Euro- pean cities. Nonetheless, he recognises that the high capital costs and lengthy payback periods deter investors. Third, Paterson is enthused not by Hinkley Point C – and its notorious £92.50 per megawatt-hour 35-year price guarantee – but by small nuclear plants, such as the Rolls-Royce facility in Derby. Nonetheless, to undertake widespread installation of such plants would give rise to major technical, regulatory and financial challenges. Paterson has also detailed that demand management has a crucial role to play, espe- cially in terms of minimising peak demand levels. Having sought to debunk so many energy myths, along with proposing the repealing of the Climate Change Act, he has undoubtedly laid himself open to widespread criticism. In fact, the response to Paterson's contro- versial speech, especially among the usual suspects, has been muted. Perhaps his detractors wished to keep his uncompromising views below the political radar by denying them the oxygen of pub- licity. Neither Decc nor Defra has sought to rebut Paterson's criticisms. Furthermore, Greenpeace's reaction has been low-key, although its climate and energy campaigner, Lawrence Carter, did respond by saying: "Blinded by ideology, he [Paterson] would… scrap the UK's Climate Change Act, putting billions of pounds of energy investments and thousands of jobs at risk." Friends of the Earth has apparently remained silent, although it has found time for press releases about issues it considers to be important, such as beavers in Devon. Clearly, in his stated resolve "to stand up to the bullies in the environmental move- ment and their subsidy-hungry allies", Paterson has been unequivocal. Had his trenchant views been voiced during his time as environment secretary – rather than as a current back bencher – they would certainly have produced the mother and father of all political rows. Nigel Hawkins, director, Nigel Hawkins Associates Renewables get a tanning Did former environment secretary Owen Paterson's recent attack on the climate change and renewables lobby get uncomfortably close to the truth for environmentalists? Nigel Hawkins reports.