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 They should be introduced only to address market failure and they should be withdrawn gradually as those distortions in the market are addressed.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. 

How Jim Murphy's mistake cost Labour - and helped make Ruth Davidson

Scottish Labour's former leader's great mistake was to run away from Labour's Scottish referendum, not on it.

The strange revival of Conservative Scotland? Another poll from north of the border, this time from the Times and YouGov, shows the Tories experiencing a revival in Scotland, up to 28 per cent of the vote, enough to net seven extra seats from the SNP.

Adding to the Nationalists’ misery, according to the same poll, they would lose East Dunbartonshire to the Liberal Democrats, reducing their strength in the Commons to a still-formidable 47 seats.

It could be worse than the polls suggest, however. In the elections to the Scottish Parliament last year, parties which backed a No vote in the referendum did better in the first-past-the-post seats than the polls would have suggested – thanks to tactical voting by No voters, who backed whichever party had the best chance of beating the SNP.

The strategic insight of Ruth Davidson, the Conservative leader in Scotland, was to to recast her party as the loudest defender of the Union between Scotland and the rest of the United Kingdom. She has absorbed large chunks of that vote from the Liberal Democrats and Labour, but, paradoxically, at the Holyrood elections at least, the “Unionist coalition” she assembled helped those parties even though it cost the vote share.

The big thing to watch is not just where the parties of the Union make gains, but where they successfully form strong second-places against whoever the strongest pro-Union party is.

Davidson’s popularity and eye for a good photo opportunity – which came first is an interesting question – mean that the natural benefactor in most places will likely be the Tories.

But it could have been very different. The first politician to hit successfully upon the “last defender of the Union” routine was Ian Murray, the last Labour MP in Scotland, who squeezed both the  Liberal Democrat and Conservative vote in his seat of Edinburgh South.

His then-leader in Scotland, Jim Murphy, had a different idea. He fought the election in 2015 to the SNP’s left, with the slogan of “Whether you’re Yes, or No, the Tories have got to go”.  There were a couple of problems with that approach, as one  former staffer put it: “Firstly, the SNP weren’t going to put the Tories in, and everyone knew it. Secondly, no-one but us wanted to move on [from the referendum]”.

Then again under different leadership, this time under Kezia Dugdale, Scottish Labour once again fought a campaign explicitly to the left of the SNP, promising to increase taxation to blunt cuts devolved from Westminster, and an agnostic position on the referendum. Dugdale said she’d be open to voting to leave the United Kingdom if Britain left the European Union. Senior Scottish Labour figures flirted with the idea that the party might be neutral in a forthcoming election. Once again, the party tried to move on – but no-one else wanted to move on.

How different things might be if instead of running away from their referendum campaign, Jim Murphy had run towards it in 2015. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

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