Renewable energy to save consumers between £25 and £100 billion

A new government report outlines the economic case for renewable energy, writes RenewableUK’s Gordon Edge.

An official report published today on the dangers of failing to invest in renewable energy represents a timely call for the Government to set clear long-term policies to boost the deployment of wind, wave and tidal power. The independent and highly authoritative study makes it clear that hard-pressed British consumers’ bills have shot up due to the UK’s dependence on imports of fossil fuels, and it therefore recommends measures to encourage investment in domestic low-carbon sources to bring the cost of electricity under control.

The official body which advises the Government on this issue, the Committee on Climate Change, says investing in low-carbon technologies between 2020 and 2030, such as wind and marine energy, will save UK consumers at least £25-£45bn over the lifetime of those projects, rising to £100bn if international gas prices continue to escalate.

The Committee says one of the best ways to stimulate investment in renewables is to set a carbon reduction target in the Energy Bill now going through Parliament, specifying a reduction to 10 per cent of 1990 levels by 2030 (from 500 grammes per kilowatt hour to 50g/kWh). MPs are due to vote on this issue in early June.

It also recommends that the Government should specify how much financial support will be available for low-carbon energy between now and 2030 – at present, the long-term vision for the power sector only goes as far as 2020. The report highlights the need to develop a specific strategy for the development of offshore wind, including ways to attract new sources of finance.

This thorough research by the most authoritative body in its field provides compelling evidence that investment in British renewables is cost-effective, whereas an unhealthy addiction to foreign fossil fuels is excruciatingly expensive, as well as being deeply irresponsible. RenewableUK’s own figures show that combined onshore and offshore wind are generating £2.5bn a year for the UK, and as such are one of the single biggest sources of investment into our economy – surely an opportunity we cannot afford to ignore. And with DECC’s own figures showing that 74 per cent of people are concerned about the UK’s reliance on imported fossil fuels, this is an issue the vast majority of the country is united on.

The Committee on Climate Change is also right to highlight the fact that the current lack of a long-term political vision is jeopardising investment in renewable energy projects – including the development of the supply chain which could create tens of thousands of jobs in wind and marine energy, with turbine factories opening around the UK.

Earlier this week the European Parliament voted in favour of setting a binding 2030 renewable energy target, to provide long-term clarity. The UK should be sending out similarly positive signals, so that we can maintain Britain’s global lead in the offshore wind, wave and tidal sectors, as well as maintaining our success in onshore wind which is the most cost effective way to generate large amounts of low carbon electricity to power our homes.

Photograph: CCC

Dr Gordon Edge is RenewableUK’s Director of Policy.

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Promoted by Janus Henderson

Europe: as the politics subside

How long can a resurgence of investor interest in Europe last?

Might Europe be the place to be?

I think European equities tick a lot of the right boxes right now. Economies are recovering – indeed the first quarter of 2017 saw Europe once more grow faster than the US, having outpaced the world’s largest economy in 2016. Valuations are not excessive, either relative to the region’s history or the US equity market. Like almost anything, I believe European equities also look compelling relative to bonds. The final part of the jigsaw puzzle might have been earnings growth, but here too Europe is, at last, getting close to achieving a gold star.

Most of this has been known for quite a few months now and is part of the explanation for the better performance of Europe year to date. Even the euro has strengthened against the US dollar, from about $1.05 at the start of 2017 to $1.12 at the time of writing. Politics looks more settled, after the surprises of the Brexit vote last year in the UK and the election of Donald Trump in the US Presidential election. Perhaps a comment I made at the beginning of 2017, that “by the end of 2017 the UK and the US might look to have been the exceptions” when it comes to successful populist votes, seems more prescient.

Now that the political backdrop is perhaps more settled, with the UK’s potentially tragic Brexit decision an exception, how long can a resurgence of interest in Europe last? One threat is the gradual move towards ‘tapering’ by the European Central Bank (ECB) of its unprecedented quantitative easing program, and the support this provides economies by injecting cash to drive down the cost of borrowing and increase consumer and business spending. But it is already clear that this will be a very slow process. The economic recovery in Europe remains quite slow and inflation, outside the UK, is well below the ECB’s target of ‘below or close to’ 2%. At the same time, the damaging effect of negative interest rates needs to be avoided.

 

What could derail this market?

The one exception to what looks to be a relatively rosy scenario, in my view, remains the UK. The Brexit ball is rolling onwards, following the invocation of the now infamous Article 50, but the calling of a General Election was another distraction. The UK is still no closer to knowing what sort of Brexit is desirable, or more likely, economically feasible. Once the reality of debt, demographics and a weak currency become clear, I suspect that the UK market will continue to struggle against other European peers.

Elsewhere in Europe, economies look well set, and I suspect that more capital spending and investment are likely to be incentivised with tax cuts in Europe, again outside the UK. In this scenario, those capital investment-related names such as Siemens, Legrand and Atlas Copco should continue to do well. Luxury names, and auto makers, many of which have rallied hard so far in 2017, are likely to struggle due to subdued consumer demand. Financials have also seen mixed performance so far, with insurance underperforming banks. This seems an anomaly given the paramount importance of long-term savings to cater for retirement.

It would be entirely healthy for European markets to drift through what will hopefully be a quiet summer, without shocks such as Brexit to contend with. I think all seems well set though for European markets to trade higher than current levels by the end of 2017.

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