Budget 2014: short-term gains for business, bad news for the environment

Posted on by Jim Watson — No Comments ↓

By Jim Watson, Research Director, UK Energy Research Centre and  Professor of Energy Policy, Sussex Energy Group in SPRU, University of Sussex

This post originally appeared on  The Conversation

The big energy policy headline in the budget was well trailed. As expected, the level of the UK’s carbon tax on electricity generation will be frozen from 2016/17 until the end of this decade. Conceived in response to lobbying by energy intensive industries and Labour’s price freeze policy, this change is part of a package that the government claims will save energy consumers up to £7bn.

The tax, known as the Carbon Price Floor, was implemented to compensate for the persistently low price of carbon in the European emissions trading scheme. Rather than increasing as planned, it will be capped at £18 per tonne of CO2. This will cost the government £1.8bn in lost revenue between 2016/17 and 2018/19.

Because this measure will make electricity cheaper than it would have been, electricity demand is expect to increase by 3-4%. Emissions may also rise too as a result. The compensation package for energy intensive industries that are liable to pay this tax will be extended to the end of the decade, and additional compensation will be available for these industries to offset the costs of renewable energy support policies.

Economics over environment

This freeze is unwelcome. It weakens the basic incentive for power generators to switch away from the use of carbon intensive fuels (particularly coal) towards lower carbon options such as gas, renewables and nuclear power. The only exception is a new exemption for electricity from efficient combined heat and power plants.

Coal-fired electricity has experienced a revival in the last couple of years at the expense of gas due to low coal prices. This has led to an increase in power sector carbon emissions after many years of decline. From a climate change perspective, it is very important that policies counteract this economic advantage to reduce the risk that coal generation will be locked in for longer than necessary.

But it is also important to remember that the Carbon Price Floor received mixed reactions when it was introduced. Many investors were sceptical, and foresaw the political risks associated with a measure that could be adjusted by the chancellor each year. They seem to have been vindicated. Its usefulness as a signal for new investment in low carbon technologies was already questionable – and now it is significantly weaker.

Keeping emissions reductions on track

To ensure emissions reductions remain on track, other measures may be necessary. The long term contracts for new sources of low carbon generation introduced by the Energy Act 2013 will be even more important. The budget does include positive statements about the government’s commitment to renewable energy through these contracts.

In addition to this, further details of the “capacity mechanism” were published on budget day. This is a complex mechanism designed to support new flexible generation to help balance supply and demand for electricity. The duration of capacity mechanism contracts for new gas-fired plants has been increased to 15 years.

This may help to improve confidence among investors who have put plans on hold because of poor economics. But the mechanism can also support existing coal plants, some of which could be awarded three-year contracts to pay for refurbishment. This adds to concerns that coal generation (and wider power sector emissions) will not be reduced quickly enough.

The demand side of energy policy was notable by its absence from the budget. A more comprehensive response to high energy bills would have included a greater emphasis on energy efficiency. This is especially the case for households and smaller companies that have limited resources to invest. While the government has an ambitious energy efficiency strategy that aims to avoid the need for 22 power stations by 2020, progress has been mixed.

The Secretary of State for energy Ed Davey MP recently admitted that the uptake of the flagship Green Deal policy had been “disappointing”. Some of the £1.8bn the government will forego as a result of the Carbon Price Floor freeze could have been used to strengthen energy efficiency programmes.

While the pressure to relieve the impact of high energy prices is understandable, this budget increased the risks that the UK’s carbon targets will not be met. It also missed an opportunity to improve energy efficiency, and to insulate energy consumers against high prices in future.

The UK Energy Research Centre is funded by three Research Councils: NERC, EPSRC and ESRC.

This article was originally published on The Conversation.
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Scottish independence debate shifts to energy issues, (again)

Posted on by Philip Johnstone — No Comments ↓

Inverness airport (2)

“Àrd-amas airson lùtha”: “Ambitious about energy”. This is the message that greets arriving passengers at Inverness Airport in the highlands of Scotland. The message occupies an entire wall of the main lounge and also explains, “the world’s best resources for wind, wave, and tidal power are here in the highlands and islands”. Observations regarding the ironies of sustainability-based salutations occupying walls of airports to be ogled by frequent flyers aside, these lines are worthy of reflection. For a start, witnessing such a domineering advert whilst the newspaper under your arm is stuffed with stories recounting the inevitable return of North Sea Oil and gas as the hot topic of the Scottish Independence debate, at least provided a timely reminder of the defining role energy policy has played – and continues to play, in the back-and-forth over the potential break up of a United Kingdom.

North Sea oil rig

As Ronald Kowalski discusses, in 1974  there was a resurgence of Scottish national identity, bolstered by the fact that the football team were performing well in the World Cup competition in West Germany. More powerful than this though, was the steep decline of the coal and steel industry between 1970-1974 orchestrated by the Heath Government. This period of destabilisation which had profound socio-economic ramifications for the East end of Glasgow – consequences still felt today, was met with protests and work-ins against the closures.

This drove many to search for political alternatives to policies coordinated from Westminster. Two years before, the Scottish National Party (SNP) oriented itself around a simple concept:  “It’s Scotland’s Oil”. This built on strong sentiments that financial flows generated from the oil-exploitation of the North Sea appeared to bypass several latitudinous degrees as they headed southward. The 1973 oil crisis made the North Sea Oil issue even more significant.

In the 1970 general election the SNP polled just 11.5% of the vote. By 1974, this had risen to 30.4% of the vote. BP had discovered the ‘Giant forties’ oil field in the North Sea and a rush for the ‘Black Gold’ was spurred by the Oil Crisis of 1973. Revealed decades later by a Freedom of Information (FoI) request made in 2005, was that the known extent of Oil and Gas in the North Sea, and the vastness of revenues that could be generated from exploiting these resources, were deliberately hushed up. It sounds like the stuff of wild conspiracy, but the originally classified documentation known as the McCrone Report is now freely available.

The 19-page document outlined that potential revenues of North Sea Oil could be vast. The consequences of this were also outlined, the report stating that an independent Scotland in control of these assets could make a Scottish currency the strongest in Europe on par with Norway, Scotland could be as rich as Switzerland, and would be in a position to lend to England, a situation it was claimed, “could last for a very long time”. The McCrone report was classified and not seen for decades. Given the rise of Scottish Independence, the publishing of the report could easily have transformed the entire history of the UK. Independence would have been a far more attractive and feasible prospect. The true extent of North Sea Oil and gas reserves were not admitted until later, by which time the fervour for independence had died down.

Bridge et al in an Energy Policy article on the ‘Geographies of Energy transition’, outline that “…the territorialisation of the UK is an unsettled project that is on-going and contested” (Bridge et al, 2013: 336). In recent weeks as the referendum on Scottish independence approaches, North Sea Oil has once again provided the terrain for some of the more bitter disputes between the Alex Salmond-led SNP and the Westminster Coalition. Recent plans have been announced to ‘fast-track’ drilling for the remaining supplies of North Sea Oil. Salmond has outlined the creation of a  ‘Norwegian style’ approach to North Sea resources in an independent Scotland, including an ‘Oil Fund’, where 10% of revenues are set aside for future generations, which could total around £10 billion pounds a year for the remaining decades of production. David Cameron however, argued that given the unstable and fluctuating nature of Oil Markets, remaining resources could be better managed by the “broad shoulders” of a United Kingdom. These announcements were made within a few miles of one another in Aberdeenshire, the heartland of the UK’s oil industry.

Scottish wind farm_tcm9-204219 (2)

Then there is the environmental issue. As Andy Rowell points out, it may be that carbon reserves could increasingly be seen as liabilities rather than assets, as the climate change issue becomes increasingly a more serious one. Thus, he argues, North Sea Oil could become a ‘stranded asset’. However, there is another side to the SNP energy strategy. They have committed to discontinuing nuclear power in Scotland which may prove challenging.  This strong direction has however created new innovative drives on the renewables front, with an ambition of 100% renewables by 2020. Scotland appears to be charging ahead with this aim, with 40% of electricity consumption met by the renewables sector in 2012. This was “significantly higher” than the rest of the UK, and anyone that has holidayed in Scotland will be aware of the immense availability and potential for the development of wind energy.

Taking a ‘Varieties of capitalism’ approach of Soskice and Hall (2001) the devolved Scottish Government seems to be taking a more ‘coordinated’ approach regarding policy implementation, especially in relation to its low carbon ambitions. Policy direction has been articulated in an attempt to make Scotland the “Saudi Arabia of renewables.” This entails being industry leaders in wind, wave and tidal, and a variety of projects, ‘test labs’ and innovation hubs have emerged to meet this aim.

It’s been a while coming, but once again energy dominates the Scottish independence debate in a variety of ways. What remains to be seen is whether Scotland continues to be “ambitious” about a low carbon transition, or whether important funds are devoted to the increasing expenses of draining the “black gold” to its last drop.

Dr Phillip Johnstone is a Research Fellow at  the Sussex Energy Group in SPRU at the University of Sussex.

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What it’s really like to do a PhD!

Posted on by Mari Martiskainen — No Comments ↓
A photograph of Mari Martiskainen smiling

A photograph of Mari Martiskainen smiling

Embarking on a PhD is similar to that of having a baby. Everyone tells you that it’s going to change your life. There will be sleepless nights, moments of despair as well as those of joy, happiness and discovery. The only thing that no one can tell you, however, is that you really don’t have a clue what it will be like as no one else can really prepare you for the kind of journey that you will personally go through with your PhD.

I started mine in October 2010, having had three and a half years of contract research at Sussex Energy Group (SEG) at SPRU, two years working for a renewables trade association and a few years for the oil industry. I chose Sussex Energy Group as the place for my PhD studies for two reasons. First, I had really enjoyed my time and projects there, not only for the varied work but also for the inspiring team. The people at SEG are brilliant academics who also happen to be human. They don’t just sit in their chambers but are out there, doing research that directly addresses the issues that are shaping energy policy today and talking about it to various audiences. Second, I have wanted to save the world since I first heard about acid rain in the 1980s. Doing a PhD in sustainable energy, in my case in community energy, might take me a little bit closer to that goal. It may have seemed like a naive motive, but at least inside me I knew that I was doing something worthwhile.

The first year of PhD research at SPRU involves research methods courses on both qualitative and quantitative research methods. The first part I really enjoyed, thinking about formulating research questions, different methodologies and how you could actually design a three-year research project. The quantitative statistics course, on the other hand, I wasn’t looking forward to. I hadn’t touched stats apart from reading the odd poll in the news since my Master’s degree back in 2002. I found the course hard and there was a lot of reading involved, even though we had a brilliant teacher and he made it all somehow digestible. On the day of the exam I was probably more nervous than in my driving test, but I passed and at first couldn’t quite believe it. Once that hurdle was over, the second one was just around the corner. The dreaded first year Research Committee. As a PhD student at SPRU, you have to pass a research committee each year. It is basically like a mini Viva, with your PhD research proposal being scrutinised by two members of faculty. It is one of those uncomfortable situations that you go through as a PhD (there are others but once you break the first one, they tend to get easier) and it is also a form of invaluable training. If you want to embark on an academic career, you will get scrutinised a lot. There is the journal peer review process, the funding applications and the conference presentations to name a few. Academics like asking questions and inspecting others’ ideas, that’s part of the job.

And you couldn’t be a PhD student without asking questions. As I prepared for my fieldwork, which I undertook in year two, I had a lot of questions myself. How would I arrange my interviews, did I have the right topic guides, what if my interviewees cancelled or the batteries in the recorder run out halfway through the interview? Doing fieldwork involved interviewing community energy practitioners as well as professional organisations. I had to be prepared to have different approaches for different audiences, ranging from having a chat and a coffee at an 80-year old gentleman’s back garden to visiting a government think thank in one of those impersonal glass buildings. I also did interviews by phone, which can be tricky and take a bit more effort as you cannot really see your interviewees’ body language or reaction to your questions. In the end only one interviewee out of 35 cancelled. And I had to use the spare batteries once. I also learned that never ever record an interview in a café. Once you listen back to your tape, you soon realise that the sound of a spoon can actually break your eardrum. A quiet room is always a must.

The fieldwork was enjoyable but it also took a lot more energy than I realised. When I’d finished, I felt quite empty and a little lost. I had done all these interviews, what now? What am I meant to do with all the data that I have collected? Luckily, I was linked to a research project and the beauty of being a PhD student linked to a research project lies in the fact that you get to join a team of more experienced researchers. I did initial analysis on all my cases and produced written material for the project, which also helped with the PhD. But I still was not quite clear of what direction I may take next. Yes I needed to think about my theoretical framing and justify my methodology. But for some reason I couldn’t see the wood from the trees and towards the start of my third year I thought I was going nowhere. Apparently this known as the Valley of Shit, a time in your PhD which the Thesis Whisperer defines as “that period of your PhD, however brief, when you lose perspective and therefore confidence and belief in yourself”. Seemingly it’s quite normal to go through it, some may even do so a few times. Mine lasted for a couple of months and I did consider whether the whole thing was worth it after all. What did keep me going though was the support of my supervisors and fellow SPRU PhD students.

I have thoroughly enjoyed my PhD experience, despite some of the pitfalls along the way. I have found out a lot about community energy in Finland and the UK. I have met some very inspiring people who are doing innovative community energy projects in their local area. I have had sleepless nights over theory, but also moments of joy and discovery through my data.

Doing a PhD can be a very solitary journey and everyone experiences it differently. I am glad that I have experienced mine at SPRU. Life doesn’t stop just because you are doing a PhD, but when the going gets tough, a PhD might stop without good supervisory support and a community of other PhD students around you, all of which have been a plenty where I chose to study.

Mari Martiskainen is a Research Student at Sussex Energy Group  in SPRU at the University of Sussex. Her thesis is titled Innovation of Community Energy in Finland and the UK and she is  supervised by Professor Gordon MacKerron and Dr Adrian Smith, and funded by the EPSRC.

Mari’s PhD is also part of the Community Innovation for Sustainable Energy project. She will shortly be taking up a post as Research Fellow for the Centre on Innovation and Energy Demand

More information on PhD study at the Science Policy Research Unit

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Utilities transforming into energy service providers?

Posted on by Colin Nolden — 2 Comments ↓

A recent Financial Times (FT) article  ‘Crisis-hit European utilities square up to technological revolution’, argues that the large utilities have underperformed compared to the broader European equity market and, according to the CEO of RWE, are facing ‘the worst structural crisis in the history of energy supply’. The article reports that some utilities are divesting, others are diversifying into more profitable markets but ‘all of them are trying to transform themselves from mere suppliers of gas and electricity to providers of increasingly exotic energy services’. I’m not so sure that this transformation  is quite as imminent as is suggested in the article but I hope that my research on diffusion of energy service contracting undertaken at the Centre on Innovation and Energy Demand (CIED) will soon provide clarity to questions regarding the scale and direction in which the UK’s energy (service) market is evolving.

Energy systems in Europe are currently undergoing significant transformations and it remains unclear what the future holds for utilities. Some will be able to retain market shares while others will not and this may partly be the result of chance and luck as much as socio-technical foresight. The example of the two German utilities E.On and RWE is particularly revealing in this context as they are under additional pressure from Germany’s nuclear exit as well as the explosive growth of renewables and low wholesale energy prices mentioned in the FT article.

Whether their changing strategies imply a business model transformation towards the provision of energy services, however, is still unclear. It is true that changing business models and new entrants are challenging the market and that energy services are one of the few market segments that have witnessed growth in recent years. At the same time the pace of expansion is more modest than energy analysts had forecast 10-15 years ago. Nevertheless, most of the incumbent utilities are increasing their vertical integration by diversifying into energy services even though the energy service market remains poorly defined and masked by uncertainty.

Energy service companies (ESCOs) have been providing decentralised heat and electricity generation, often from renewable sources, combined with a service component exceeding that of the conventional ‘customer services’ provided by utilities for decades. Subsidiaries of utilities are increasingly dominant in this market thanks to the transferral and concentration of appropriate skills and knowledge through mergers and acquisitions of specialised energy service companies. Successful energy service contracts tend to be concentrated in the public sector and among large industrial customers but huge if not insurmountable barriers are preventing the emergence of home energy services. Transaction costs and shared ownership/responsibility (also known as the tenant-landlord problem) of assets are the most prominent barriers. The small share of energy services compared to their total revenue and the difficulty of making significant profits also act as discouragements for some of these issues to be tackled.

An imminent technological revolution in home energy services as suggested in the FT article may also fail to materialise for other reasons. Not everyone will feel the need to be able to switch on lights remotely and research on digital thermostats indicates that apart from enthusiastic nerds, few people are willing to engage in energy management gadgets (Peffer et al). The entrance of new technology companies in the energy market, particularly the example of Google’s acquisition of Nest Labs also needs to be taken with a pinch of salt as many commentators have pointed out that the primary objective is data mining as opposed to an energy service transformation. It also remains to be seen in how far projected energy savings actually materialise. Many developments promising energy savings through increasing energy efficiency may fail to do so because of the increasing energy requirements of the gadgets themselves that are designed to manage energy efficiently and incentivise energy demand reductions.

A lot is currently being speculated in relation to smart technologies and the ‘internet of things’ but it appears likely that neither the centralised conventional fossil-fuel powered utility energy market nor the decentralised and predominantly renewably operated and needs-oriented energy service market will prevail. Centralised generation will remain a core element of our generation infrastructure while the share of energy services and building management with energy service components by integrating smart and renewable technologies is going to increase. Households are an untapped resource in this rapidly changing socio-technical environment but it is early days to predict the way the market will evolve and how incumbent companies will respond.

Colin Nolden is a Research Fellow at the Centre on Innovation and Energy Demand (CIED) and is currently researching the diffusion of energy service contracting seeking to provide more clarity to questions regarding the scale and direction in which the UK’s energy (service) market is evolving. The response of utilities to the growing share of energy services in light of uncertain developments in their core business as well as the role of technological and business innovations in driving what might potentially mount to a technological revolution will be scrutinised in order to develop a better understanding of the conditions for a successful diffusion of energy service contracting, low-carbon technologies and demand side management.

The Centre on Innovation and Energy Demand is based at the Sussex Energy Group in SPRU at the University of Sussex.

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Statistics with stories – the making of a policy brief?

Posted on by Nicolette Fox — No Comments ↓

It feels like it has been raining non-stop for weeks, even though I can now look outside and see some blue sky amongst the clouds. Certainly for those vulnerable communities across the country there is currently no silver  lining as they face the frightening prospect of yet more heavy storms. But it would appear that our experience of extreme weather might be making a difference to our attitudes to climate change.

Last year a survey by C3W , a partnership of four Welsh universities, showed that there had been a significant rise in the number of people in Wales believing in climate change following the flooding there in 2012 – from 77 percent to 88 percent. And the science would suggested that they are right. Only this week Lord Stern has warned that the extreme weather in recent years is a clear sign that climate change is with us. Even the Government’s Met Office  suggested that while there is ‘no definitive answer’, climate change is likely to be a factor in the persistent rain that has recently swept across the country.

What was also interesting about the Welsh survey is that the majority said that measures should be taken to address not just the consequences of climate change but also the causes. Many of us working in sustainability have been grappling for years as to the best way to engage the public around key environmental issues. The received wisdom is that people respond better to positive messages rather than being scared about the environment. While I go along with the argument that positive sustainability stories are a powerful way of reaching people, directly ‘experiencing’ climate change, however that is interpreted by the public, must also be a game changer.

For the academic community, engaging with the public is one pathway to creating a research impact, as is influencing policy makers. Briefings appear a tried and tested way to reaching the policy community. On reflection, maybe not ‘tested’ as it is often difficult to tease out the influence that briefings have on policy.

Engaging with policymakers is part of the DNA of SPRU – it does after all stand for Science and Technology Policy Research. At the Sussex Energy Group we have produced briefings for many years and been fortunate to have many good links with policymakers. But like most things, it pays from time to time to take a fresh look at what you are doing and see if it can be improved. So a small group  of us are doing just that with our energy policy briefs. As a first step I decided to have a look round the net and see what else was out there. Here are some of the policy briefs that stood out for me.

Firstly, the briefings produced by the International Institute for Environment and Development – have great graphics, accessible writing and clear ‘policy pointers’ on the first page. A very different policy briefing on rising energy costs was produced by Save the Children.  What stood out for me here, was the emotional pull of hearing people’s stories:

“I only have a bath before school on a Sunday night and one on a Wednesday night,

because hot water is expensive. The boys carry around their bed covers in the house

and sit downstairs with them in the day because it’s so cold…”Stacey 16

Such stories were interwoven with hard-hitting facts drawn from a survey of parents. The combination of statistics with stories makes for a compelling policy brief, even if at ten pages it was quite long.

Charities are used to drawing on stories in their communications, whether for raising funds or getting the attention of policy makers. While academic policy briefings are very different, I am certain there are lessons we can learn from them. For example, qualitative researchers often have a wealth of interview material to draw on, and the occasional anonymised quote or case study could bring a brief to life for policy makers. As researchers we also often have powerful facts and figures that we can draw on from our work.

Closer to home I have also seen some excellent examples of briefings. The Sussex Energy Group, in collaboration with 3S at UEA, have produced a set of research briefing. The series clearly communicates,   sometimes in just a few hundred words, the world of grassroots innovation. I am sure they would be very useful for policy makers looking to quickly grasp some of the key issues in the subject – and they also look great. Global Studies at Sussex, also has a well designed policy series… I could go on.

So back to my theme of communications and engagement, as researchers we can undoubtedly improve on our practices, as well as learn from others, both within and beyond the academic world. So in the coming months I will be keeping a watching brief on what I find inspiring from the world of sustainability communications and engagement and how this might translate to our work as researchers.

And in the tradition of all good communications I would love to turn this into a conversation so do get in touch if you know of some great examples of engagement. And if you happen to be a policy maker I have a few questions to ask about our briefs…

Email: n.fox@sussex.ac.uk

Nicolette Fox is a PhD student at  the Sussex Energy Group in SPRU at the University of Sussex.  Her research looks at the impact of microgeneration on households. Prior to this she worked for many years as an environmental journalist and sustainability communications consultant, winning top industry awards including WWF’s Environmental Campaign of the Year, Media Natura’s Regional Documentary of the Year and  PR Week’s Best Community Campaign.

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