The Conservative Energy Secretary, Amber Rudd, has started well. For five years, the Lib Dems had run energy policy inside a Conservative-led coalition. It was a period which saw energy prices double and delivered some of the biggest and most damaging failures in energy policy for a generation.
Changes to tackle the spiralling subsidies and costs of renewable energy which force up household bills have now been promised. Rightly, the Government now wants those sectors which have become subsidy-reliant in recent years to stand on their own and compete. The new Minister has described this policy change as a bid to protect consumers.
It is a welcome change of rhetoric from the blank cheques previously pledged. Predictably, the renewables lobby has reacted in a fit of rage – but this is simply a consequence of allowing the sector to become subsidy-drunk.
Coupled with this, Ms Rudd has also said that Britain will not now go faster than other developed countries in cutting greenhouse gas emissions.
Another key development in the last month has been the axing of the Green Deal scheme with Ministers describing it as a “total flop”. This is yet another expensive and embarrassing example which shows that the coalition’s energy policy was not fit for purpose. Launched in 2013 under the then Lib Dem Energy Secretary Chris Huhne, the scheme practically invited scams as builders were subsidised to install new household boilers and improve insulation.
A National Audit Office inquiry alongside a Commons Public Accounts Committee probe is necessary so that the policy mistakes and wasted funds are fully exposed and explained. Former coalition Ministers who were responsible for the inception, introduction and maintenance of the Green Deal should face the committee, alongside senior civil servants from the Department of Energy and Climate Change. Of potential embarrassment is the fact that Ms Rudd was the junior Minister with responsibility for the Green Deal until her promotion in May.
Deeply damaging policies which remain in place must also now be addressed. In 2013 the coalition announced a “Carbon Price Floor” which placed a minimum tax on the carbon dioxide emissions from power stations, such as Ferrybridge, Drax and Eggborough. On paper, this tax is a relatively easy way for the Treasury to raise over £2bn of extra revenue a year. But its side effects for prices, jobs and energy security are enormous.
This Carbon Tax has been responsible for costing British jobs, increasing prices, damaging energy intensive manufacturers and jeopardising energy security. The levels the tax has been set at mean that emissions from British power stations are now up to five times more expensive than from similar plants on the continent. These then get passed on in the form of higher energy bills and force energy intensive industries here to close and relocate.
The news that Tata, in Rotherham, is to axe 750 skilled steel jobs was blamed by the company on increasingly high UK energy bills. The tax can also be blamed for the premature closure of the Ferrybridge power station near Castleford. Under current rules the plant could have operated through to 2021, but will now close later this year owing to the costs of the Carbon Tax.
The tax has also forced the closure of the large Scottish Longannet coal-fired power station. Which one is next? Alongside the loss of jobs in manufacturing and the early closure of power stations, the tax has also landed the final deathblow on Yorkshire’s deep mine coal industry. Because the tax has been ramped up year-on-year since 2013 the coal-fired power stations have consequently worked tirelessly to stockpile as much coal as possible at lower rates, because the tax is applied on the amount of coal purchased.
This has created a massive distortion in the coal supply market and made it increasingly difficult for pits like Hatfield and Kellingley to sell coal at good prices.
Hatfield Colliery, near Doncaster, closed in mid-July and Kellingley will shut just before Christmas. Their closures mean that Yorkshire’s vast deep coal resource will become stranded for the first time in nearly 200 years.
The new Energy Secretary must act now before any more damage is done.
Tony Lodge is a Research Fellow at the Centre for Policy Studies. His new pamphlet The Great Green Hangover – How the new Government can reduce bills and avoid an energy crisis will be published in the summer.