The only thing “record-breaking” about the latest clean energy auction is the subsidies Ed Miliband’s thrown at it. Time to level with taxpayers about the true cost of net zero, says Tim Focas
Here we go again – it didn’t take long did it. The new government, with Ed Miliband at the helm of energy policy (Lord please help us), is celebrating a “record-breaking” 131 new clean energy projects from the latest renewable auction round. According to Miliband, this is proof that the government is swooping in to rescue a “broken energy policy” left behind by the previous administration. But before we break out the party poppers (check the back of the sofa in No 10 Prime Minister – could be some left from 2020), let’s take a closer look at what’s really going on here.
This so-called “achievement” is built on the foundations of a process set in motion long before this government took the reins. The previous auction round, AR5, flopped — producing exactly zero bids for new offshore wind capacity because the subsidies on offer were too low. Instead of addressing the underlying issues, Miliband’s team has simply thrown more money at the problem (well, this is a Labour government folks). The result? A successful auction this time around, but at a much steeper cost to the taxpayer. The budget for this auction was one and a half billion, the most expensive such auction to date.
To secure this new wave of renewable energy projects, the government had to promise a guaranteed price of £82 per megawatt-hour (MWh) for electricity from offshore wind. That’s almost two-thirds higher than in the previous auction. In other words, we’re paying more and more to get these projects off the ground. So, is this really solving the problem, or just plastering over the cracks with cash?
Investing in renewable energy is, of course, vital. But so is being honest about the costs. The government’s approach of quietly hiking up subsidies while shouting about their green achievements is dangerously close to the kind of political sleight of hand we’ve seen from the likes of Donald Trump. You can almost hear the echoes of “biggest, best, most tremendous” in Miliband’s rhetoric. But we’ve heard this political discourse before, and it is so 2016.
The true cost of net zero
What the government needs to do now is level with the public. Yes, we’re getting more offshore wind capacity, but at what price? The total cost of this latest auction could balloon to £10bn, a staggering burden on taxpayers. Meanwhile, basic support like the winter fuel allowance for pensioners remains woefully inadequate in comparison. The public deserves better than smoke and mirrors. We need a government that’s willing to have an open and honest conversation about the trade-offs involved in transitioning to green energy. If that means spelling out the true cost to the taxpayer, so be it. In the long run, open and honest communications will do more to build trust and support for renewable energy than any amount of political grandstanding.
Here’s a communications idea for new government: stop pretending you’ve pulled off a miracle. We’re not buying it. Instead, start treating the public like grown-ups. Admit that clean energy comes with a price tag, and explain how you plan to manage that cost without leaving the most vulnerable out in the cold. Because this time, the old political spin simply won’t wash.
Tim Focas is head of capital markets at Aspectus Group