CBI warns of exposure to price rises on global markets and argues for more green projects
George Osborne was increasingly isolated over energy policy last night, after the head of the CBI said that too much reliance on gas as a future source of energy would leave consumers and businesses dangerously exposed to further sharp price rises on global markets.
After a week in which two of Britain’s biggest energy suppliers shocked customers by announcing increases of up to 9% on gas and electricity bills from next month, business leaders are warning that the chancellor’s enthusiasm for a “dash for gas” looks like a recipe for economic and environmental disaster.
In the latest blow to Osborne – before a crucial ministerial meeting to determine government energy policy this week – the director general of the CBI, John Cridland, said it was “crucial” to avoid too much reliance on one energy source, particularly if, as in the case of gas, much would have to be imported.
Many business leaders, together with the environmental lobby, argue that investment in green energy will not only be good for the UK economy in terms of investment and job creation, but will also mean the UK has more control over its own future energy provision, rather than being reliant on imports.
In a clear warning to the chancellor, who has made no secret of his support for greater use of gas and less government support for renewable energy, Cridland said: “Gas has a big part to play in the UK’s energy mix in the years to come, but we cannot become dependent on any one source of energy.
Over-reliance on new gas would leave us exposed to global price and supply fluctuations and jeopardise our carbon targets, so we need to build more of everything, including renewables, nuclear and CCS [carbon capture and storage].”
Last Monday, seven global electricity and nuclear technology companies, including Siemens and Mitsubishi Power Systems, threatened to withdraw hundreds of millions of pounds of investment in new energy projects in Britain because of uncertainties of about the government’s commitment to green, low-carbon policies. The withdrawal of so much investment would mean the loss of thousands of jobs. The firms said the lack of certainty and absence of decisions “have caused us to reassess the level of political risk in the UK”.
This Thursday, the so-called Quad of senior ministers, which includes David Cameron, Osborne, Nick Clegg and Danny Alexander, Lib Dem chief secretary to the Treasury, will meet to decide on the content of the energy bill, which aims to set the framework for a future of affordable, clean energy in the UK.
Sources say Osborne may push for cuts to offshore wind subsidies from government and for reductions in support for carbon capture and storage projects from four to two or even one, in return for agreeing a flexible decarbonisation target for the industry.
Joss Garman, the political director of Greenpeace, called on Clegg to stand up for the green agenda at the meeting: “When rocketing gas prices have already driven up bills for millions of families, and when both business and consumer groups are warning that gas is likely to get even more expensive, it would be idiotic for ministers to give the green light to a big increase in our reliance on pricey imports of this polluting fuel. The Liberal Democrats should insist on stabilising consumer bills with clean, home-grown renewables instead.”
Writing in today’s Observer, Lord Stern, author of the 2006 Stern review on the economics of climate change, said that, while subsidies for green energy would eventually have to end, it was “crucial” that any reductions in subsidies for low-carbon energy were not imposed so suddenly that they would “undermine the confidence of the private sector and hold back badly needed investment in the power sector”.Osborne’s support for a new dash for gas was revealed in a letter he wrote to Ed Davey, the Libl Dem energy and climate change secretary, in July.
“We need a statement which gives a clear, strong signal that we regard unabated gas as able to play a core part of our electricity generation to at least 2030 – not just providing back-up for wind plant or peaking capacity,” he wrote.
“This will provide context for the gas strategy and will help reassure investors, enabling investment in new gas power stations and the infrastructure that supports them such as pipelines between Norway and the UK which could enable us to become a gas hub.
“We should commit publicly to ensuring that British consumers will be able to get the benefits if the price of gas falls.”
However, speaking at an IMF/World Bank conference in Japan last Friday he admitted he was unhappy that energy prices were rising so fast: “Of course I’m concerned when I see electricity bills going up, partly that is because of things beyond our control – what’s happening in the world with oil prices and gas prices.”
Today an investigation by consumer magazine Which? finds that only one in 10 people can identify the cheapest energy deal when presented with a range of standard energy tariffs. When shown the tariffs in a simpler form, in the style of petrol forecourt displays, the number shot up to nine out of 10.
Only 8% of the people could identify the cheapest deal out of the six leading suppliers’ standard electricity tariffs, 60% got the answer wrong and 32% said they simply didn’t know.
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