The case for onshore wind

The Chancellor’s crusade against onshore wind, whatever the merits with his own backbenchers, is economically ill-judged.

In a straight political fight between George Osborne and Ed Davey, few pundits would have put their money on the Chancellor losing. Not only has the Department of Energy and Climate Change recently lost its Permanent Secretary, in what can only be described as strange circumstances, but a much-trailed cut in subsidy support for onshore wind was kicked into the long grass of the Parliamentary summer recess.

So how is it that when the extent to which subsidies would be cut was finally determined this week it was announced that it would be DECC’s 10 per cent cut rather than the Chancellor’s preferred cut of 25 per cent? There has been so much political debate around wind power that, perhaps, the economic case has been overlooked. Osborne’s case against onshore wind is simply this: wind does not blow all the time, so why should we subsidise a technology that is intermittent, cannot provide the base load of electricity supply and despoils some of the most beautiful landscape in the country which, incidentally, happens to be in Conservative-held seats?

The answer, of course, is that in the long-term we should not. Subsidies should never be a permanent feature of any market. They should be introduced only to address market failure and they should be withdrawn gradually as those distortions in the market are addressed. Treasury economists no doubt recognise the economic rectitude of such a position; whether they can square it with their ongoing subsidies to fossil fuels is entirely a different matter.

Last year, the OECD estimated that in 2010 the subsidies for coal, gas and petrol in the UK amounted to £3.6bn on top of which the Chancellor, in the 2012 budget, has announced further exploration and production subsidies of £65m to develop the West of Shetland fields. Quite what market failures these subsidies are being used to redress is unclear. On the contrary, it would appear that the fossil fuels has an entrenched subsidy culture where such taxpayer handouts are regarded as a right rather than a means of addressing what is an otherwise unlevel playing field. The total subsidy paid to onshore wind amounted to less than £400m in 2010-11 or £6 on the annual bill of the average household. This gives some better sense of proportion about the subsidy onshore wind currently enjoys against the £3.6bn in consumption subsidies that fossil fuels enjoy before the cost of carbon emissions is even factored in.

The real market failure is that the environmental, social and economic cost of greenhouse gas emissions is not properly factored into our fossil fuel price. The government has recognised this and has tried to attribute a price to carbon emissions through the EU Emissions Trading Scheme (ETS). Unfortunately the carbon price has neither been stable enough nor high enough to redress this market failure even for the 40% of the UK’s carbon emissions that are covered by the ETS. This means that fossil fuels are operating in a market that is tilted distinctly in their favour.  Renewables such as onshore wind, and which do not produce polluting carbon emissions, are perhaps entitled to claim therefore that there is a clear justification for being subsidised. Bringing new technologies to the market can be difficult and many technologies have died in the valley that lies between demonstrator prototype and full commercial development. If the UK is to develop world leading renewable technology the Government must be prepared to support them to market. The Renewable Obligation subsidy, brought in under Labour, was designed to do this - supporting new wind generation as technology is successively improved and economies of scale reduce production costs. It is worth noting that it is precisely the positive trajectory of onshore wind that led DECC to argue that the subsidy could be reduced by 10% in the first place.

This trajectory leads some in the industry to predict that onshore wind will be cost competitive with gas by 2020. For this reason the subsidy should progressively be reduced, but, at the same time, the gas sector should increasingly pay the full cost of its carbon emissions which it is currently failing to do. Even if average household electricity consumption remains unchanged (and we should all sincerely hope it reduces dramatically) and even if the subsidy remains unchanged (and it has already come down and will further) the additional cost to a household bill in 2020 as a result of the most optimistic growth forecast in onshore wind would still only be £13 per year. Yet gas produces significant carbon emissions and onshore wind produces none.

The Chancellor’s crusade against onshore wind, whatever the merits with his own backbenchers, is economically ill-judged. What compounds his mistake though, is that he has now demanded additional measures to subsidise gas. Should policy change to ensure we meet our carbon budgets, these investments will prove to be redundant as we will require electricity produced at approximately 50 grams of CO₂e per kilowatt/hour. Gas-fired power stations cannot achieve this. The Chancellor is using public money to subsidise investment in a technology that will be incapable of meeting the legal requirements of the UK’s climate Change Change Act.

Barry Gardiner is the Labour MP for Brent North and Ed Miliband's Special Envoy on Climate Change and the Environment

The Whitelee onshore windfarm in Scotland. Photograph: Getty Images

Barry Gardiner is Labour MP for Brent North and shadow minister for Energy and Climate Change. 

Picture: ANDRÉ CARRILHO
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Leader: Boris Johnson, a liar and a charlatan

The Foreign Secretary demeans a great office of state with his carelessness and posturing. 

Boris Johnson is a liar, a charlatan and a narcissist. In 1988, when he was a reporter at the Times, he fabricated a quotation from his godfather, an eminent historian, which duly appeared in a news story on the front page. He was sacked. (We might pause here to acknowledge the advantage to a young journalist of having a godfather whose opinions were deemed worthy of appearing in a national newspaper.) Three decades later, his character has not improved.

On 17 September, Mr Johnson wrote a lengthy, hyperbolic article for the Daily Telegraph laying out his “vision” for Brexit – in terms calculated to provoke and undermine the Prime Minister (who was scheduled to give a speech on Brexit in Florence, Italy, as we went to press). Extracts of his “article”, which reads more like a speech, appeared while a terror suspect was on the loose and the country’s threat level was at “critical”, leading the Scottish Conservative leader, Ruth Davidson, to remark: “On the day of a terror attack where Britons were maimed, just hours after the threat level is raised, our only thoughts should be on service.”

Three other facets of this story are noteworthy. First, the article was published alongside other pieces echoing and praising its conclusions, indicating that the Telegraph is now operating as a subsidiary of the Johnson for PM campaign. Second, Theresa May did not respond by immediately sacking her disloyal Foreign Secretary – a measure of how much the botched election campaign has weakened her authority. Finally, it is remarkable that Mr Johnson’s article repeated the most egregious – and most effective – lie of the EU referendum campaign. “Once we have settled our accounts, we will take back control of roughly £350m per week,” the Foreign Secretary claimed. “It would be a fine thing, as many of us have pointed out, if a lot of that money went on the NHS.”

This was the promise of Brexit laid out by the official Vote Leave team: we send £350m to Brussels, and after leaving the EU, that money can be spent on public services. Yet the £350m figure includes the rebate secured by Margaret Thatcher – so just under a third of the sum never leaves the country. Also, any plausible deal will involve paying significant amounts to the EU budget in return for continued participation in science and security agreements. To continue to invoke this figure is shameless. That is not a partisan sentiment: the head of the UK Statistics Authority, Sir David Norgrove, denounced Mr Johnson’s “clear misuse of official statistics”.

In the days that followed, the chief strategist of Vote Leave, Dominic Cummings – who, as Simon Heffer writes in this week's New Statesman, is widely suspected of involvement in Mr Johnson’s article – added his voice. Brexit was a “shambles” so far, he claimed, because of the ineptitude of the civil service and the government’s decision to invoke Article 50 before outlining its own detailed demands.

There is a fine Yiddish word to describe this – chutzpah. Mr Johnson, like all the other senior members of Vote Leave in parliament, voted to trigger Article 50 in March. If he and his allies had concerns about this process, the time to speak up was then.

It has been clear for some time that Mr Johnson has no ideological attachment to Brexit. (During the referendum campaign, he wrote articles arguing both the Leave and Remain case, before deciding which one to publish – in the Telegraph, naturally.) However, every day brings fresh evidence that he and his allies are not interested in the tough, detailed negotiations required for such an epic undertaking. They will brush aside any concerns about our readiness for such a huge challenge by insisting that Brexit would be a success if only they were in charge of it.

This is unlikely. Constant reports emerge of how lightly Mr Johnson treats his current role. At a summit aiming to tackle the grotesque humanitarian crisis in Yemen, he is said to have astounded diplomats by joking: “With friends like these, who needs Yemenis?” The Foreign Secretary demeans a great office of state with his carelessness and posturing. By extension, he demeans our politics. 

This article first appeared in the 21 September 2017 issue of the New Statesman, The revenge of the left