Climate Change Policy

Following our Board meeting earlier this month, non-executive director Alison Vipond shares her thoughts on the latest climate change policy developments….

Although I didn’t watch last month’s Oscars’ awards ceremony, I couldn’t help but notice that climate change got a good mention by Leonardo DiCaprio. Thanks Leo! We need more prominent and vocal champions to keep public and political awareness very much on the issue.

If we are to achieve the global ambitions on climate change, set out in the COP21 Paris agreement agreed in December, we need a great, green energy revolution to advance the world rapidly to a low carbon economy. Looking around the world, there are some great examples of innovation and inspiration. I love the world’s largest solar power plant, powered by the Saharan Sun in Morocco, set to provide half the country’s energy by 2020. Indeed, renewable energy is becoming ever more cost-competitive, and shareholders in fossil fuel companies are becoming very jittery about the future value of their investment.

Here in the UK, recent developments in UK energy policy leave a lot to be desired. The House of Commons Energy and Climate Change Committee published its report in early March on “Investor Confidence in the UK Energy Sector” – it is a grim read. The Committee pulled no punches, identifying six factors in Government policy that, it says, have combined to damage investor confidence. In their own words:

(1) Sudden and numerous policy announcements have marred the UK’s reputation for stable and predictable policy development.

(2) A lack of transparency in the decision-making process has led investors to question the Government’s rationale for policy changes and to wonder “what will be next?”

(3) There has been insufficient consideration of investor impacts, exemplified by insufficient consultation and engagement ahead of policy decisions.

(4) Policy inconsistency and contradictory approaches have sent mixed messages to the investment community about the direction of travel. Examples of this include:

• claiming to want to decarbonise at lowest cost while simultaneously halting onshore wind;
• giving local people a say in wind consents but not shale gas; and
• emphasising the important role of gas while scrapping support for carbon capture and storage.

(5) The lack of a long-term vision has made it more difficult for investment committees to make decisions about projects that are, by their nature, long-term endeavours.

(6) A policy “cliff-edge” in 2020, does not provide sufficient visibility about the size of the future Levy Control Framework (LCF) budget or what will happen to the Carbon Price Floor. This is a problem when projects can take five years or longer to go from conception to completion.

All this is clearly illustrated by the UK’s position in the EY Renewable Energy Country Attractiveness Index, which fell from 8th place to 11th place in just 4 months between June and September 2015. Interestingly, the Chancellor’s Budget was silent on his plans, announced last year, to increase VAT on solar panels from 5% to 20% in August 2016 prompting speculation that the increase may not go ahead.

To our mind, our energy future needs to be based on renewables. Shale gas and nuclear are just blips in the long term picture. Ultimately, we need to tap into the UK’s rich natural, unending, clean resources of sun, wind, waves and tides.

A heartening example of solar innovation is the Thames Water floating solar farm (23,000 solar panels) at the Queen Elizabeth II reservoir near Heathrow, which will power local water treatment works. Indeed, London has huge potential to tap into solar power. It is currently lagging behind, with fewer panels per rooftop than many northern cities. A new report by Greenpeace called for London Mayoral candidates to come forward with a detailed solar plan with specific policies which would revolutionise energy and the green economy in the capital.