Opinion: why Decc’s biggest policy goal now needs to be luck

The government's energy policies mean success in 2016 will rely heavily on external factors, says former shadow energy minister Tom Greatrex. And a significant amount of luck.

While not quite displaying the levels of ecstatic joy of the announcement of the 2012 Olympics coming to the UK, the pleased and relieved faces of energy ministers and officials in Paris should be one of the enduring images of 2015. Amber Rudd joined the applause and welcomed the deal – as she was quite right to do. Achieving any sort of consensus amongst close to 200 states, with different starting points, technology preferences and immediate domestic policy challenges, was in itself an achievement. While cynics at either end of the spectrum decried the Paris outcome as insubstantial, in many ways it was the hardest part of sustaining global action on emissions, succeeding where Copenhagen became a missed opportunity.

The challenge for individual governments – including our own – is now how to make the promise a reality. The conclusion to the Paris discussions was sandwiched between two announcements which illustrate just why there appears to be continuing confusion about the government’s attitude to reducing carbon emissions. It is hard to see how pulling the promised £1 billion from the competition for carbon capture and storage does anything other than set back our ability to reduce industrial emissions. Jettisoning environmental protections on underground gas extraction the government accepted earlier this calendar year suggests a view of unconventional gas as much more than simply an intelligent alternative to importing the gas we will continue to need.

In reality, both of those changes were more about the Treasury than DECC. The institutional orthodoxy of the Treasury is to be against anything that adds costs in the short term (be that support for onshore wind, solar, energy efficiency programmes or a capital fund for the CCS competition), and in favour of bills that come in the future. It is the attitude of the Treasury to investment which can leave innovation hamstrung – the inability to distinguish between value and cost is longstanding, and was there well before the general election.

When former Energy Secretary Ed Davey popped up to criticise the abandonment of CCS, he neglected to mention that the £1bn of funding was initially raided by his colleague Danny Alexander when he was Chief Secretary to the Treasury, and had never actually returned to DECC other than in vague promises, now abandoned. The Chancellor’s attitude to shale gas is based on an overly optimistic extrapolation of the US experience, which looks highly unlikely to be anywhere near economically viable when a barrel of brent crude is trading at around $36.

If Amber Rudd’s choices, those she has made and those made for her by the Treasury, are to make good, then she and the government are going to be reliant on external factors aligning in the early months of 2016. Her best chance is for the relatively mild but windy weather of the early winter to continue through to March (so consumers use less), for OPEC to change their approach to oil supply and a consequent modest increase in price (so some investment is viable), for the final outcome of the CMA’s investigation to include measures which are both deliverable for industry and acceptable to consumers and for smart grid technology and storage to make huge strides in spite of apparent government indifference. At least two of those may well happen, one seems unlikely and the other is the weather.

The combination of tighter capacity margins, an increasingly imbalanced supply mix and a commodity price yet to find its floor brings not only short term problems but also inhibits medium term mitigation and long term action. Mostly that is outwith the control of Ministers, so Amber Rudd must hope that in 2016 she is well endowed with that priceless political commodity – luck.