Transformation Moment

2. Rethinking ‘energy’

Energy is a vital part of everyday life. It powers industry and keeps us warm. It runs our transport and keeps the lights on. Energy has brought huge benefits to humankind, but also heavy costs. Today’s energy systems are largely based on dirty, outdated, dysfunctional and anti-democratic structures. The key challenge is to transform energy thinking along lines that will –

avoid climate crises,

keep people’s homes warm (i.e. end fuel poverty), their transport systems moving, and electronic/communications systems running,

make communities and localities active partners in more accountable energy systems, and

develop more flexible approaches to energy security.

All this has a cost but, as others have discovered, the economic benefits of transformation vastly outstrip its costs. This has undoubtably drawn on the huge reductions in clean energy technology costs.

In Germany, their Energiewende programme has been a driving force in the tumbling global costs of both solar power and onshore wind.

Internationally, the fall in solar and wind costs has been little short of astonishing.[36]

Solar will achieve grid parity within the decade. Where permitted, onshore wind energy has already done so; now being cheaper than oil, gas, and coal power stations.

In 2016, Vattenfall won a contract to supply Denmark will (off-shore) wind electricity at a groundbreaking price of €49.50/MWh.[37] The Netherlands then awarded a second contract

for its ‘Borssele’ wind farm, supplying electricity at €54.5/MWh.[38] Energy pricing (and thinking) will never be the same.

Within the UK, Scotland hopes to become a world leader in wind power, developing prototype turbine blades that are 50% lighter, 30% stronger and almost 10% cheaper than existing ones.[39]

What the UK lacks is a secure market and development plan. It also lacks the insight Denmark has brought to the question of public acceptability of on-shore wind.

The majority of Danish wind turbines are community-owned. The popularity/acceptability of this enabled Denmark set a world record; delivering 42.1% of its annual electricity needs from wind power alone. Moreover,

“The Danish parliament wants the Scandinavian country to get at least half of its electric power from wind by 2020. According to the forecast, this target looks to be met. By 2030, the country hopes that 90% of the electricity and heating supply will come from renewable energy.”[40]

But real transformational change comes when this energy can also be sold locally – at discounted rates – and where markets can ‘sell’ energy saving (the consumption of ‘less’) in preference to the production of more.

2.1. Old energy: an existential crisis

Clean energy is throwing the business model of conventional energy into an existential crisis. Disinvestment campaigns disrupt the viability of coal and oil investment[41],[42] while the U.S. Fracking industry rides a tidal wave of bankruptcy and debt.

“Nearly a year of low oil prices has been a disaster for drillers of oil and gas in American shale. Their costs of production are mostly far above sales prices, notwithstanding innovative improvements in the cost-efficiency of fracking. They have only been able to keep going because of Wall Street’s willingness to shovel mountains of debt in their direction: nearly a quarter of a trillion dollars of it to date, mostly junk rated.

Eight drillers have already gone bankrupt and many more can be expected not to survive the review by banks of credit lines coming up in October. Analysts speak of imminent carnage. The US shale boom is heading for bust. There is a whiff of sub-prime in the spectacle”.[43]

Alongside this, nuclear, with an ever-rising cost curve – and ever-elusive disposal strategy -runs from crisis, to delay, to cost over-run … and always in the pursuit of eternal public subsidies.[44]

The astonishing level of UK public subsidy demanded by new nuclear almost defies understanding.[45] With the estimated public costs of Hinkley Point now running at over £37bn[46] the whole basis of the UK debate looked drunk, deluded, or both. No wonder the government hit the ‘pause’ button.

Better, cheaper, alternatives are pouring in.[47] Vattenfall’s off-shore wind farm development[48] (set to supply electricity 10 years earlier and 25% cheaper) was just the first to expose the paucity of thinking behind Hinkley Point. The UK decision to press on may still be relying on EDF’s financial incompetence to pull the plug.

The real problem for nuclear, however, lies in its claim to be the provider of ‘base-load power’, when base-load power will not be at the centre of tomorrow’s energy systems.[49] Flexibility, transparency, locality and interactivity are already becoming more critical cornerstones.

Traditional energy industry assumptions are being torn apart, only to be replaced by markets that are lighter, smarter, more interactive and adaptable than today’s.

In Germany, by the end of 2012, “190 communities had been successful in bidding to run their local grid (at least nine of these being co-operatives) and 70 municipal utilities had been founded.”[50] Internationally, a burgeoning array of towns, cities and regions are en route to becoming their own ‘virtual’ power stations.

Tomorrow’s ‘smart energy systems’ will need to

deliver more, but consume less

take clean energy before dirty

use smart technologies for localised balancing and storage

and

be more open, democratic, sustainable and accountable.

Countries embracing such changes will become the leaders of the clean energy revolution. Those living in denial will become its laggards. Countries wedded to an unsustainable energy past will become the inheritors of an unaffordable energy future. At the moment, Britain is amongst the laggards.

2.2. A different starting point

Britain could begin its own transformation by shifting government financial support from ‘bads’ to ‘goods’. This is not just about the extortionate cost of new nuclear. According to the IMF, in 2014 Britain spent 7 times as much on fossil fuel subsidies as it did on renewables.[51],[52]

Professor Ian Arbon, at the Institute of Mechanical Engineers, described this with painful clarity: “The UK is the only country in the world who thinks it is going to hit its renewable targets by doing more fossil fuels.”[53] The latest UK government proposal – a £1bn Shale Wealth Fund – to bribe the public into supporting the insupportable case for Fracking – would merely fuel the crisis[54]. It exemplifies the paucity of leadership that drives UK energy and climate thinking.Perversely, the UK government has (mis-)used such public subsidies at the same time as cutting programmes that promote energy efficiency, zero-carbon homes and carbon taxation. None of this makes any sense. Instead Britain needs to –Introduce a UK ‘right of local supply’, where the benefits (and cost savings) of clean energy production can be shared within the communities delivering it. Use towns and cities as the drivers of change, promoting the innovative social partnerships needed to deliver security within a more sustainable energy system.Put energy efficiency at the heart of new energy obligations, making energy saving (the consumption of ‘less’) a central element in a new era of ‘Smart’, Rethink the Grid, it’s structure, priorities and responsibilities; including an extended role for existing Network Operators (DNO’s), allowing them to act as service providers and co-investors in the delivery of devolved carbon budget, andBecome a leader in decentralised and innovative energy storage systems.

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