“The nation that leads the clean energy economy will be the nation that leads the global economy ” (President Barack Obama State of the Union address, January 27, 2010). We have all heard this or similar, time and time again.

However whether we are convinced is another story. In the backdrop of a global economic recession, it is easy for the ‘low carbon’ agenda to be viewed in an unfavourable light or even as a

…‘long shot’…

Even if the principle of low carbon, sustainable growth is favoured, most still view the agenda as a burden on ever increasing energy bills, or in case of some businesses, an imposition by legally binding targets and legislation. Despite the opportunities low carbon energy could create through innovation and enabling leaders in a globally evolving and growing sector, the risk is the recession delays investment, thereby leaving us with a high-carbon legacy.

In the UK, large-scale investment is needed to upgrade and develop energy infrastructure by 2020, estimated at £110 billion by the government.  Moreover, Ofgem estimates that a total of around £200bn worth of new investment in energy is needed, if we are to meet our 2050 target.

Then as demand for energy grows and as the UK retires 25 per cent of its generating capacity by 2020 (due to closure of aging plant and the requirements of the Large Combustion Plant Directive (now a part of the Industrial Emissions Directive), security of supply has become an even bigger priority for the government.

Even though the cost of fossil fuels for energy is expected to increase further (and comparatively the cost of fuel for a renewable power plant is zero!), the higher upfront capital costs required for investment in low carbon forms of generation lowers their appeal to global investors, much needed in the UK.

At last years Clean Energy Summit it was recognised that despite reaching a record high of £163bn in 2011, global clean energy investment fell to it’s lowest since 2009 to £16bn in the first quarter of 2012 (reported by Reuters April 2012).

Seizing an opportunity…

Project developers look to governments to create the right frameworks for low-carbon investment and provide regulatory certainty and an ongoing commitment to support low carbon technologies. Only then will we be able to encourage private financing, as in current circumstances the government does not have the balance sheet strength to fully support growth in low carbon energy.

The process of reforming our electricity market to encourage further investment in low carbon power generation continues, with innovation, research and development being important components for its success. And new technologies such as Carbon Capture and Storage (CCS) will play their part in creating market leadership and must continue to be supported and remain high on the agenda.

As discussed at one of our meetings of the LFIG Energy and Climate Change group the UK must be prepared to take a lead just like Denmark did in developing turbines for windfarms and pioneering wind power in the 1970s.

The last Labour Government for long recognised the importance of a stable policy framework, strong incentives and set out the need for a clear transition plan to a low carbon economy in stimulating markets. Although, the coalition has continued with many of Labour’s plans – progress is being overshadowed by spending cuts.

Additionally, delays in decision making, mixed signals about their commitment to a low carbon future, and more recently uncertainty over our role in the European Union, have all contributed to shaking the confidence of much needed investors in the UK.

We risk losing out to our European neighbours and those governments that provide clearer signals and stability within their regulatory frameworks.

The UK has long been attractive for inward investment because of the large domestic market, access to the EU market, and favourable political and socio-economic conditions. The government has an important job to sustain this and promote low carbon growth in the UK.  We cannot do this alone and focus needs to turn to this growth being based in the UK, irrespective of whether or not ownership resides with a UK based institution.

The UK needs a stable environment and world leading incentives for basing investment here. Only then will we be able to reap the benefits from  innovation, jobs and growth that a low carbon economy can bring.

Amisha Patel is an Energy Policy and Public Affairs Advisor for an Independent Power generator and LFIG Energy and Climate Change Policy Group Chair. She writes here in a personal capacity

To find out more about the LFIG Energy and Climate Change Group contact Amisha on amisha(dot)patel(at)fig(dot)org(dot)uk

Low Carbon Energy Needs Clear Signals and Stability from Government
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