tidal lagoon project in Swansea Bay still waiting for green light
The UK’s transition to a low-carbon economy will lead to new markets being created which could generate up to £21 billion in value annually for utilities, according to new research from Stephen Hall of the University of Leeds and Jeffrey Hardy of Imperial College London. Their research, which focuses on the effects of energy policy on the creation of new markets, can help companies plan for the future. Courtesy The Conversation.
To fight climate change and meet the Paris Agreement targets the world will need to rapidly switch from fossil fuels to renewable or nuclear energy. According to the International Energy Agency, this will require up to US$5 trillion (£3.7 trillion) of new investment by 2040.
There’s always lots of talk about how much this will cost and whether low-carbon electricity can still be cheap for consumers. But the flip side to every cost is a revenue – and what has received less attention is the size of the opportunity that will be created for green growth and new investment.
To figure this out, we need to explore which “mixes” of technology would meet decarbonisation targets. In some UK scenarios, for instance, existing fossil fuel power stations would be converted to capture and store their carbon emissions, while others involve a complete renewal of the whole sector through bottom-up, localised energy systems.
If the UK instead goes for large carbon capture plants, the flexibility market will be worth almost nothing
Modelling and scenario building is a great way to test out possible futures without having to experiment with the whole electricity system in real time. But, while they can tell us a lot about what technology is required and what it will cost, these scenarios don’t say very much about what kind of value new energy systems will create and for whom.
This is where our research comes in. Together with colleagues, we have analysed how new markets are created and destroyed within these UK electricity system scenarios. These new markets include large-scale low-carbon generation, such as offshore wind or new nuclear power stations, and the provision of new services, such as charging infrastructure for electric vehicles.
Our work shows that in these new markets electricity utilities could access up to £21 billion per year of new value by 2050. In context, that would be worth up to 30% of the total energy market that year.
Understanding how the transition to low-carbon energy might cause certain sectors to grow or shrink is important because, first, it helps utilities plan for the future. Our work shows that large-scale low-carbon generation, for example offshore wind, could be worth up to £8 billion annually by 2050. However, in scenarios in which electricity demand is met through decentralised, smaller-scale systems, big offshore wind farms are needed much less. In that scenario the market would be worth less than £1 billion per year.
The value created by the UK’s offshore wind farms, nuclear power plants or carbon capture needs to flow towards its citizens, while export opportunities in offshore wind and storage technologies are maximised
Second, focusing always on “cost” as opposed to “opportunity” misses the critical point that new investment leads to new jobs and technological innovation. If the UK focuses on offshore wind or solar, for instance, it would need a plan for when the wind doesn’t blow or the sun doesn’t shine. This would mean a big boost for the “flexibility” market, which includes everything from batteries to services which encourage people to use energy at certain times. In a high-renewables future, it could be worth more than £1 billion per year. But if the UK instead goes for large carbon capture plants, the flexibility market will be worth almost nothing.
Finally, by demonstrating how different markets are created and destroyed in different energy futures, we can better understand the effects of energy policy on market creation. The UK is leading the world in the development of offshore wind power, as shown by a dramatic fall in the cost of government subsidies. Rather than focus on lowest total cost, this type of analysis shows how government can make policies which both achieve low-carbon ambitions and foster new export sectors. This requires innovation policy as well as subsidy support and new environmental regulation.
By calculating the “size of the prize” in clean energy futures our work shows that up to £21 billion of new value is available – but new value for whom? Clean energy policy cannot simply be about developing new technology. The value created by the UK’s offshore wind farms, nuclear power plants or carbon capture needs to flow towards its citizens, while export opportunities in offshore wind and storage technologies are maximised.
Editor’s Note
Stephen Hall is Research Fellow in energy economics and policy at the University of Leeds.
Jeffrey Hardy is Senior Research Fellow at the Grantham Institute for Climate Change and the Environment, Imperial College London.
This article was first published on The Conversation and is republished here with permission from the authors and under the publisher’s Creative Commons licence.
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The final para nailed it: new value for whom? It is a matter of record that Dong (oersted) is state owned (50.1%). This begs the question if owning an off-shore developer is good enough for the danish state – why not the Uk state? In a realted area, UK DNOs are angling themselves to own/control storage – almost all are foreign owned – and are “regulated (ha!) monopolies” – why not cut out the regulator and have them state owned? Finally: export opportunities – what export opportunities? The Uk has no wind turbine manufacturer, there are some manufacturing facilities for WTs – all foreign owned, the main off-shore developer is foreign state owned, ditto for nuclear (EdF). Over the past 40 years under tory & tory-lite governments the Uk has de-industrialised. Now that an interesting business opportunity comes along it no longer has the capacity (or indeed – pace Labour getting into gov – the ideological inclination to formulate an industrial policy fit for purpose) to take advantage of these developments. Sic transit gloria mundi (although I never thought there was much wonderful about the UK even in its prime – 100 years ago).
Mike, if Government renationalised much of the UK energy industry would things be any better than they are today? I doubt they would. MacDonell has said he would borrow to renationalise, wisely not just grab energy assets which would scare off investors big time. But wouldn’t the money be better spent on the NHS?
I agree the loss of UK manufacturing industry is a great shame. Perhaps freeing the UK from the clutches of the EU might help power equipment makers. We’ll no longer be bound by EU procurement directives which over the last 30 years seemed to help continental firms enter the UK, but not so much UK firms exporting to the continent. Where protectionism was rife, but UK power equipment companies were sold off to foreign buyers.
Also EU state aid rules will no longer apply leaving the UK Government to decide policy on supporting industry e.g. steel making. Devaluation of Sterling against the Euro should also help manufacturing stay in business, even if export tariffs to Europe apply.
So making UK a low income county seems to be the target, to draw clothing manucfacturing from bangla desh and steel manufacturing from china by lower wages in UK than in china or bangladesh, do I understand you right?
UK also has the problem, that higher qualified people went to financial industries, not manufacturing. They can not work at two places at the same time. So decline of manufacturing is partly the other side of the coin of rising financial sector. brexit might get the financial sector in troubles as well…..
This is in response to Mr West’s comment.
UK DNOs need to be re-nationalised they are just money machines for foreign interests (e.g. Northern Power – Warren Buffet). As for the rest – gov could set up competition to both the generators and the retailers (essentially the same thing). “Scare off investors big time” – hmm that comment would have some validity were it not for Prof Michael Grubb stating publicly (several times) that the UK power sectors has “milked its assets” – I was there and asked for clarification – & indeed he meant what he said. Grubb advises Ofgem. You were saying about scaring off “investors”? Really? What investors?
Where I started to laugh […] was the comment about “money better spent on the NHS”. The UK has a sovereign currency. This means that the gov’ through the bank of England can create money – without limit – up to the point where the UK economy is at full capacity. Thus there is no false “choice” – spend money on NHS or re-nationalistion – both are possible. NB: this is not about gov debt (which is optional) this is simply “printing money”. EU countries in the Euro zone are unable to do this due to the 3% deficit limit.
[…]
The loss of UK mfu is not a “shame” – that puts it into the same pot as the football team you support losing a match – “what a shame”. The decline of UK mfu is a national scandal & disgrace. […] UK equipment mfus quoted on the UK stock market were sold off on the basis of “gee I can make a profit today selling their shares” aka Thatcher’s “markets rule OK” & “there is no such thing as (UK) society” (= bugger the social or industrial impact if I can make money so be it). Blaming the EU? pathetic. Pilkingtons to Asahai Glass? Boots to tax dodgers Cadbury’s (American asset strippers) etc etc ad nauseum & zero to do with the EU. All sold off for what? […]
State aid rules? another […] joke. What about Hinkley Pointless? State aid rules have a flexibility wrt their interpretation by DG Compo (coupled to the intensity/effectiveness of lobbying for a given issue). This makes them resemble a rubber ruler. & in the case of steel – I recall it was the Tories that were against implementing dumping measures against Chinese steel.
[…]
[This comment has been edited. Please refrain from personal attacks on this website.]
Re. creating money (quantitive easing), the UK Government has been playing that game since 2009 and needs to unwind the position soon. No, creating money to finance needlessly renationalising parts of the energy industry is far from desirable, particularly the DNOs.
Labour is morphing into a Marxist 1970s style party which will make them unelectable. So it’s not going to happen anyway, but re-nationalisation would achieve nothing. The public/voters do not care about DNOs being ‘money machines for foreign interests’. Indeed they are regulated so tightly foreign investors can keep them.
If the State is to invest in energy, it must be in something worthwhile. Public investment in new nuclear projects would be desirable to spur on badly needed new generation capacity.
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Hinkley Point C is the first of a badly needed series of new reactors needed to replace closing nukes in the 2020s. The only feasible alternative able to provide firm generating capacity for the UK would be new CCGTs. Aside from the carbon issues, CCGTs would require more UK gas imports which would not be good for security relying so much on gas. So HPC is far from being pointless.
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It can’t be denied that the EU has been a big factor in UK industrial decline. When the UK joined the EU (then the EEC) in 1973 we had:
– a 45 million tonnes a year steel industry. Today we are battling to save an 11 million tonnes industry.
– a 400,000 tonnes a year aluminium industry. Today we have just 43,000 tonnes of capacity left.
– 20 million tonnes of cement capacity. Today we have 12 million tonnes.
– a 1 million tonnes a year fishing industry. Today we have 600,000 tonnes.
The October 2013 government “Future of Manufacturing” Report shows that between 1951 and 1973 metals output rose 3% a year. Since joining the EEC/EU it has declined by more than 6%.
Whilst it may not be fair to blame all this decline on membership of the EU, as there are other factors, it nonetheless shows categorically that joining the EU and helping create the so called single market has not helped the UK grow and has not saved many of our industries from decline.
In some cases EU policies are the main driver of the disaster. The Common Fishing Policy is clearly the main reason for the dreadful decline of our fishing industry, as many foreign vessels were licensed to take our fish.
The EU has prevented UK subsidy of industry under its state aid rules, but has often provided subsidised loans and grants to businesses to set up elsewhere in the EU. The UK has seen a spate of factory closures balanced by new and expanded facilities in poorer EU countries.
Looking at our huge balance of payments deficit today in goods with the rest of the EU, we can see the long term impact of the EU’s damage to our manufacturing capacity. Balance of payments figures show us in heavy deficit in machinery, vehicles, electrical machinery, mineral fuels, plastics, iron and steel, wood and clothing. In 2015 our total goods trade deficit hit £85 billion with the rest of the EU. Between 2008 and 2015 our exports grew at 5% with the rest of the world, whilst falling with the EU.
http://johnredwoodsdiary.com/2016/06/16/how-joining-the-eu-led-to-a-big-decline-in-uk-industry/
QE has all gone to the banks on they basis that they would lend more – they haven’t. Polls of public opinion are consistent: +/- 70% want re-nationalise of energy & rail & water (so much for your theory that the UK public don’t care – they do). UK DNOs are not tightly regulated – if they were, they would not be getting companies & individuals to pay for their assets on which they then earn a return (Chicago gangsters of the 1920s would recognise the modus operandi). Unfortunately I have to negotiate connection agreements on behalf of clients with this group of charlatans – it is both a demeaning and depressing experience.
Your statement on Labour being a Marxist party is more suitable for the pages of the Daily Mail or Telegraph. […] As for nuclear being worthwhile, really? At a Hinkley Pointless price? The UK needs flexible generation, Hinkley ain’t.
As for the final set of paras on UK de-industrialisation and the meme “its the EU’s fault” you omit one salient fact – Thatcher 1979 and her monetarisation policies which in the time frame 1979 – 1984 eviscerated the UK’s mfu base (I guess this falls into your “other factors”). I recall the 1982 letter by 100s of economists in the Times criticising gov policy. As for ” The EU has prevented UK subsidy of industry under its state aid rules” – did you read my comment on the flexibility of state aid? I have expert knowledge in this area – having been involved several cases. [..]
“Polls of public opinion are consistent: +/- 70% want re-nationalise of energy & rail & water (so much for your theory that the UK public don’t care – they do).”
Looking at energy alone, according to a recent ‘YouGov’ survey 53% think ‘Energy’ companies should be in the Public Sector.
https://yougov.co.uk/news/2017/05/19/nationalisation-vs-privatisation-public-view/
However that doesn’t mean they would support wasting public money to renationalise them. More importantly, the UK public are focused on energy suppliers, not network companies and the National Grid. Voters typically are not that interested in who owns the network operators.
“UK DNOs are not tightly regulated – if they were, they would not be getting companies & individuals to pay for their assets on which they then earn a return.”
Mike, I’ve no interest in DNOs not being tightly regulated I assure you. OFGEM needs to be on their tails keeping prices down, performance up and penalising them if needed. On your point about connection assets. I recall customers usually paid a contribution to connection costs, not the full amount. Assets financed by DNO’s need to earn a return. That’s odd if OFGEM also allow DNOs a return on assets customers have funded.
In response to Mr West’s second comment: Sir, I am not sure why you have brought up the example of the Common Fishing Policy in response to a discussion on UK manufacturing jobs within energy, but since you have raised it I wanted to add a couple of points:
– In 2014, UK fishing industry caught 752,000 tonnes of fish, which was the second largest catch of any country within the EU. This was up from 652,000 tonnes in 2004, when they had the fourth largest catch. This appears to correspond to approx. 30% of the fish in British waters with the remainder fished from other countries.
– If the figure reported for pre-1973 of 1 million tonnes a year is correct, it is in part due to British fishing around Iceland, which is not a member of the EU. The British fishing fleet lost out on a substantial (non-British) fishing ground in 1976 when Iceland extended national fishing limits out to 200 miles.
– All of these facts are available through the UK’s independent factchecking site, Fullfact.org
– These facts do not support your conclusion that EU membership is to blame for a decline in UK fishing industry.
– Please keep in mind that correlation is not the same as causation.
Also worth noting is that a low-carbon energy system means money saved by not buying foreign fossil fuels. That would help the UK’s balance of trade
Regarding Mr. Wests comment that “creating money (quantitive easing), the UK Government has been playing that game since 2009 and needs to unwind the position soon” he merely reveals hi lack of real understanding of what QE did.
QE lowered interest rates due to the Central Bank purchasing gilts this lowered the interest rates of the gilts whilst increasing face value and at the same time flooding bank reserves with extra Government money. Unwinding this process would simply lower the face value of Gilts while increasing interest rates meaning MORE interest would be paid into the economy as well as a concomitant effect of removing bank reserves thereby increasing interest rates.
The effect of this would be to throw those with mortgages into greater hardship creating further risk of default. Given that the private sector in the UK has debts reaching nearly 2 trillion this is something that could destabilise the whole rickety system.
Mr. West points out the trade deficit. This is ALL THE MORE reason that significant Government spending is necessary and would NOT be inflationary (don’t mention Venezuela, that country is pegged to the dollar and suffered the collapse of its only dollar creating export).
Mike parr, above is absolutely correct to point out that a sovereign currency issuing Government like the UK cannot default on its debts and is the only issuer of the currency-logic dictates that with a trade deficit and massive private sector indebtedness ( the real cause of economic crises), the ONLY answer is for greater public spending so that private debts can be paid down and the public purpose responded to.
Of course , if Mr. West enjoys a ‘rentier’ rip-off society where wealth is siphoned upward and the banks ‘rent-out’ money to a private sector from which it extracts wealth then he will be clearly wanting to preserve the status quo.
His reference to the Labour Government being ‘Marxist’ is utterly risible and farcical and indicative of a mind that has lost it reference point due to a society that has moved so far to the right that common sense now seems extreme.
Why is there poverty in the UK – or in the world for that matter, if a government can print whatever money it likes?
Karel-whenever a Government spends it ‘prints’ money, it’s happening all the time.
You ask ‘Why is there poverty in the UK – or in the world for that matter, if a government can print whatever money it likes?’
The short answer to that is ‘vested interests.’ You might have noticed that, by and large, the world i snot run by terribly well-meaning people; many of them have links to global capital interests and the financial sector so will not make decisions that threaten the interests of themselves and their ‘friends.’
In the case of many Third World Countries, poverty is not alleviated due to multi-nationals in the extractive industries exploiting the resources of these countries often with the connivance of elites. Many of these countries have debts denominated in foreign currency and have to focus on exporting their resources to obtain dollars or Euros. Furthermore, institutions like the IMF have them in a headlock and dictate their domestic policy options while unpayable debts stymie the development of domestic infrastructure and the needs of the local population.
Printing money has its limits in certain circumstances, for example, in ZImbabwe there had been a civil war and domestic agriculture had collapsed so inflation was produced due to printing money beyond the productive capacity of the economy.
The UK has massive levels of private debt, underemployment, low skilled, poor quality jobs and many in poorly payed self-employment. The reason the Government does nothing about this is because the financial sector gains massively from private debt and high house prices.
two -thirds of the Tory Party have Major interests in land and property.(www.theguardian.com/politics/2015/may/06/number-of-mps-who-earn-from-renting-out-property-rises-by-a-third)
Many Tory Ministers have interests in the privatisation of health care.(http://www.mirror.co.uk/news/uk-news/selling-nhs-profit-full-list-4646154)
Osborne’s best man benefited from the sale of shares in Royal Mail.(http://www.dailymail.co.uk/news/article-2455653/George-Osbornes-best-man-Peter-Davies-make-millions-Royal-Mail-shares.html)
I could go on.
In the case of the UK, Billions could be pumped into the economy without creating any significant inflation-the money would create jobs in areas such as house building, social care and infrastructure etc. Many would have the opportunity to pay of debts and get the voraciously greedy banks off their backs. The economy would come back to life. But remember one thing above all: it is private debt that creates recessions and crises and collapses of economies NOT the Government debt. The Tories tell you it is the Government Debt that is the problem in order that their nice, cushy financial scam carries on. It is myth and misinformation. When Thatcher came to power in 1979, bank credit (private debt) was at about 55% of GDP, it is now at 170% and is a huge ball and chain on the economy, communities and the well-being of millions.
Contrary to what the mendacious May tells us, the country cannot go bankrupt, not can we be like Greece or Venezuela because those countries are pegged to a currency that is not their own ( Euro/Dollar). The UK is not in that situation and can freely spend to create jobs, infrastructure and provide a a health service that is not in continuous crisis.
Governments, in recent years won’t tell you this because they don’t want the system to change, they want a debt-laden populace, stressed and unhappy while they rake in the proceeds.
have a think about whether you M.P (or M.E.P) is aware of this or is just feeding you lies and broken ideology.
Your ideology sounds rather broken to me. It is an illusion to think you can get rich by spending money. Or that “a country can’t go broke”. Wealth depends on production and saving. It requires scarce resources. Effort (labour, materials, mental effort) spent on education can’t be spent on infrastructure, etc. The kind of central banking you describe is an alchemist’s dream. Or rather the dream of a child who thinks he can have it all if he waves a magic wand.
Karel -you haven’t really read a word I wrote, have you wrote. You say:
1. Wealth depends on production – then why does our banking system lend so little for productive use? You seem to think the present set up is fine then why are firms finding it so hard to get bank credit. I’ll tell you why: Banks have been lending primarily for housing and land; unproductive asset bubble creation. that’s because Banks have what you call a ‘magic wand’ they create money out of nowhere and make money off the back of it -you like that?
2. So you think I was talking nonsense about the UK Government not defaulting? Well, have a listen to Alan Greenspan talking about how America can never default : http://www.youtube.com/watch?v=jB0lcX-GtOU
Greenspan is a right-wing free marketer so not on the Left at all, yet he makes it clear (because he understands the monetary system) that a country that prints its own currency cannot default, it can ALWAYS pay its debts. A country that issues its own currency is not like a household because we, as citizens, do not print the currency.
During the First World War, the UK came off the Gold Standard and started printing currency freely to pay for armaments. Now we need housing, social care, infrastructure. It is possible to pay for these things which increase the wealth of the society. Inflated house prices only increase the wealth of banks and landowners.
We have a massive problem of private debt combined with a trade deficit which means that the ONLY source of money can be that of Government spending otherwise private indebtedness can only deepen. In a monetary economy you need money to engage ‘effort’ yet you talk of effort as if it were independent of money.
The Central Banking I describe is WHAT HAPPENS NOW. At present Government spending is about 42%. It just needs to be higher to offset the disastrous levels of private debt that could collapse the system again.
What would you prefer:
1. The Government reduce spending even more so that our social services, education, infrastructure collapse even more and private debt becomes even more stratospheric?
or
2) The Government spends on education, infrastructure, green energy, housing and brings down private debt so that the system doesn’t collapse again as it did in 2007?
Anyway at least listen to the Greenspan video, it’s only about a minute long and will clear up the myths and nonsense people like the vacuous Mrs. May come out with when they say: ‘Corbyn will bankrupt Britain. It’s nonsense because it is private debt that is bankrupting Britain and enriching the banks and financial centre.
This is not the right forum to continue this discussion. It is too time consuming for me anyway. To refer to Greenspan is simply an argument from authority. He was not a right-wing free-marketeer, since right wing free marketeers are opposed to central banking and the creation of fiat money. Real right-wing free-marketeers. Check out Mises, Hayek and Rothbard, e.g. at http://www.mises.org if you want my views on this.
Mr Cohen, your classic leftie/socialist arguments promoting raising public expenditure will not fool tax payers. They know that means, stoking public debt with borrowing and raising taxes to fund billions on public expenditure. Much would be squandered. Private industry is the wealth creator, not tax and spend Governments. Increasing public expenditure would likely drive inflation, and the UK doesn’t need Government creating jobs as unemployment is not high.
Labour’s plans to raise money to fund increased public exp. by taxing industry would backfire dragging down private investment and companies could decide to leave the UK. That’s not going to help the UK’s trade deficit.
“………..the Labour Government being ‘Marxist’ is utterly risible and farcical”
Not sure what planet you are living on, thankfully Labour are not in Government!
Advocating raising Government expenditure significantly would likely lead to big public debt problems. Labour Governments always fall into this trap, before being booted out by voters. BTW Labour’s shadow Chancellor when challenged repeatedly has not denied he is Marxist and recommends Das Kapital. Electing him and Corbyn would be an unmitigated disaster for the UK. Amongst other issues too, Labour has a big anti-semitism problem to root out.
Assertion 1: “Much would be squandered”
You don’tknow – you are just guessing.
Fundamental Misunderstanding 1: “not tax and spend Governments.”
Governments spend first & then recover the spending as tax later. A fundamental reality which you seem to have missed.
Fundamental Misunderstanding 2: “Increasing public expenditure would likely drive inflation”
Only in the case where the economy is at full capacity (this is a fact – not an assertion).
Fundamental Misunderstandign 3: “Labour’s plans to raise money to fund increased public exp. by taxing industry would backfire dragging down private investment and companies”
You did not read or you did not understand my previous posts: givernment does not need to tax to raise money.
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I will keep this short.
http://www.taxresearch.org.uk/Blog/2017/10/16/can-we-afford-the-nhs/comment-page-1/#comment-790524
The link provides a comprehensive & functional explanation of government finance. It is not a left wing, right wing or any other “wing” explanation, it is an explanation. Only the final para or two cover the NHS. The final para could with modest changes cover any “utility”, electricity, water or gas & in so doing raises political questions on ownership of these vital services.