Gordon Brown’s New Deal will do little to advance renewable energy

One of the most impressive monuments to Franklin D. Roosevelt’s New Deal is the network of dams that stud the Tennessee River valley, built to provide work and to modernise a backward corner of America during the Great Depression. Seventy-five years later and on the other side of the Atlantic, work is once again growing scarce and an economy is in need of modernisation, this time to secure energy supplies and slash the release of planet-heating greenhouse gases. The British government has been playing up the parallels, with much ministerial talk of a “Green New Deal”. In March Gordon Brown promised the creation of a “low-carbon economy” for Britain that would provide jobs and clean up industry. Lord Mandelson, his business secretary, talked of a new industrial revolution and said that there was “no high-carbon future”.

It is a seductive vision. If Keynesian stimulus is to be the order of the day, greenery seems a good sector in which to apply it. There are benefits besides decarbonisation. Much of the contribution would come from changing the way electricity is generated, and many of Britain’s old power plants need replacing anyway. A switch to renewable power would cut dependence on oil and natural gas as national production of both dwindles. Windy, storm-lashed Britain is a good place to harness the weather; boosters talk excitedly of a splurge on renewable electricity and the possibility of capturing the market for offshore wind turbines or wave-power machines, creating tens of thousands of jobs. On April 1st Statkraft, a state-owned Norwegian firm, said it was investing £500m ($715m) in a Scottish wind-farm project.

Not everyone is convinced. Green rhetoric in Britain has traditionally soared far above reality. Greenhouse-gas emissions are more or less unchanged since Labour came to power in 1997 (a better record than many countries, but hardly the promised transformation). Less than 5% of British electricity came from renewable sources in 2006, compared with 26% in Denmark and 48% in Sweden. Ambitious goals to derive 30-35% of electricity from renewable sources by 2020 are widely considered impossible. A related pledge that 15% of total energy consumption (of which electricity accounts for roughly a third) will be renewable by that date looks even less plausible.

Mr Brown’s green New Deal looks similarly flimsy. On March 31st HSBC, a big bank, published a report ranking countries by how green their economic-stimulus packages were. The bank reckons that Britain is allocating just 7% of its fiscal stimulus to greenery, compared with 12% in America, 34% in China and a whopping 81% in South Korea (see chart). A separate report prepared for Greenpeace, a pressure group, by consultants at the New Economics Foundation (NEF) considers only genuinely new funding and arrives at a figure of just 0.6%, or £120m.

Private-sector caution reflects this official inaction. Lower oil prices, sagging demand for energy and hard-to-get credit have caused many firms to cut back on renewables worldwide. But there are particular problems in Britain, not least the falling pound (most of the wind turbines installed there, for example, are built in continental Europe).

Energy companies such as Centrica and EDF, a French firm, are re-evaluating their British renewables projects. Lord Browne, a former boss of the big British oil firm BP, doubts that Britain’s laissez-faire energy policy is up to the job of decarbonising the economy, and wants state-owned banks directed to finance green-energy projects. (BP has opted out of the British renewables market because it expects low returns.) And last year Royal Dutch Shell pulled out of a £3 billion wind-farm in the Thames estuary.

Convinced that these are short-term problems, fans of renewables want government cash to see projects through the tough times. But there are longer-term reasons for Britain’s comparative sluggishness. Its subsidy regime, under which green power stations generate tradable certificates, is unwieldy compared with traditional cash handouts in other countries. In the past, all technologies were subsidised equally, so most investment went into onshore wind, the cheapest source of renewable energy. But windy spots tend to be beautiful spots, and local opposition bogged down projects. There have been reforms: planning changes have made local objections easier to ignore, and the subsidy scheme was tweaked on April 1st to give extra cash to more expensive technologies, such as offshore wind turbines. An independent Climate Change Committee is supposed to advise on and police legally binding emissions-reduction targets, but it is new and its powers untested.

One fear shared by many enthusiasts of renewables, says Andrew Simms, policy director of the NEF, is that the government is simply losing interest in them. It has moved speedily to revive the nuclear-power industry, by contrast. From a position of cordial dislike in 2003, the government announced itself in favour of new nuclear plants in principle as early as 2006.

More recently ministers have been positively prescriptive, suggesting how many plants might be built and where. A takeover of British Energy, which runs most existing nuclear plants, by EDF, keen to build more, took place last year. A new nuclear laboratory has been founded, schemes to train workers set up and the vexed issue of waste disposal re-examined.

Nuclear-power stations take many years to build, so new ones will not help Britain meet its 2020 targets for curbing emissions. But the technology is well understood. Politicians may have calculated that a few nuclear-power stations will be easier to sell the public than thousands of wind turbines. And energy does not have to be renewable to be low-carbon.

Source: The Economist

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