The UK’s green energy market has been a hot topic in the media recently; prompted by an announcement from the EU to give the green light to a new system of subsides for renewable energy providers.
But, what does this actually all mean?
Glide co-founder, James Villarreal, shares his opinion on the recent reforms to the UK green energy market.
Over the last decade, and arguably even further back, green energy and environmental awareness has taken a huge step out of the laboratory and thrust itself into public consciousness. Nowadays, a great deal of human behaviour, both social and political, is influenced by the simple consideration of, “is this good for the planet?” or perhaps more truthfully, “will other people see this as good for the planet?”
Undeniably, it’s cool to be green. While BP and Shell continue to make efforts to promote their green ethos, it only takes one major oil spill and a photo of an oil-coated seabird to completely shift public opinion and portray them as profit-hungry, ocean killing, evil-doers. Similarly, most major coffee chains around the world have all latched onto words like “100% organic” and “sustainably sourced”, as while this is no doubt a good thing, it encourages people to consume their products, safe in the knowledge they may also be doing some good for the world.
The new system of subsidies sanctioned by the EU, namely the “contract for difference” scheme (CfD), will pay a pay a guaranteed price for electricity generated from projects such as offshore wind farms, as part of an effort to restore investor certainty in low-carbon generation.
As aging nuclear and coal plants go offline over the next decade, this is seen as a positive step forward for the UK government in their bid to overhaul our national electricity market by delivering low-carbon energy and reliable electricity supplies, but is it enough to actually make a difference?
No, not really.
When announcing the new system, EU Commission vice-president in charge of competition policy Joaquin Almunia said: “The UK contracts for difference encourage all renewable energy technologies producing electricity to compete against each other for support beyond 2016.
“It is a fine example of how to promote the decarbonisation of the economy with market-based support mechanisms, at the lowest possible cost for consumers.”
Interestingly, concerns have been voiced about how effective the CfDs and accompanying auction process will be at mobilising investment. The solar market in particular is concerned CfDs will shut out smaller players in the market because they often lack the skills and resources necessary to compete for support contracts at auction.
However, Energy and Climate Change Secretary Ed Davey said the decision was “great news” for the UK’s energy industry. “[It] shows that our major reforms to the electricity markets are urgent and needed to turn around the historic neglect of the sector,” he said.
And he’s partly right. We do need major reform to turn around the historic neglect of this sector, but increasing competition really isn’t the answer.
As Dale Vince, founder of Ecotricity (and Glide’s electricity supplier), recently said, “…there are more issues at play here than just the need for greater retail competition. In fact, the focus from some politicians on competition as the absolute answer to rising energy bills is a red herring.”
The actual answer of course will require a lot more than increased competition. The current privatised energy industry is suited to short-term shareholder interests when we actually need to see long term plans and long-term solutions. First and foremost, we need to increase our efforts to effectively regulate an industry that is currently exploited for its complete lack of bite and power.
At Glide, we choose to provide all of our tenants with electricity completely from renewal sources as part of our own commitment to a greener future. As the general public, the media, and the majority of energy businesses continue to lose patience with our government, it’s not just a moral decision, but simply good business sense for other utilities and services providers across the UK to start doing the same.