The Madness of the Energy (and Climate) Minister

by | Jul 16, 2013

Ed Davey’s comments have been causing a stir this week. First, there is this exchange between Andrew Neil and the Energy Secretary on the Sunday Politics show…

It’s good to see Davey finally getting a grilling about the basis for the government’s policies. And it’s even more refreshing to see it on the BBC. However, the over-emphasis on science doesn’t help the debate. As others have pointed out. Davey just returns to the same old argument, about majorities of scientists — the bogus polarisation of binary, opposing categories of ‘scientists’ vs ‘deniers’. Although Davey claims that ‘climate science is incredibly complicated – it’s new, innovative science’, he reduces it to a simple story of goodies and baddies.

The debate about the ‘science’ has been going on for years. Even if the alarmist interpretation of climate science is weakening, it won’t end environmental alarmism and the shoddy thinking that underpins government policy. There are many problems with the government’s policies and thinking, just one of which I pointed out in the previous post.

This is most concisely demonstrated by a tweet from Richard Tol, in response to the interview, in which the subject of rising energy bills was too briefly mentioned.

I particularly like the bit where @EdwardDaveyMP claims that they’re putting up energy prices to combat energy poverty. @afneil

Davey is facing a real challenge, and the fact of his impatient comments about his critics serve only to demonstrate that he is steepening his rhetoric because he is losing the argument. It turns out that the ‘crackpots and conspiracy theorists’ aren’t so easy to dismiss as such. Hence, his open letter to the Taxpayers Alliance (TPA).

(And it cannot help poor old Davey that his predecessor at DECC, the disgraced Chris Huhne, who, barely out of prison is intent on developing tensions between the Treasury and DECC, and between the Tories and the ailing junior partners in the coalition).

Davey was taking issue with the TPA, who are running a campaign called Stop the Energy Swindle. Said Davey, about the TPA’s argument:

… it is disingenuous to seek to pin the blame on government policies using inflated assessments of their impacts while ignoring the main driver for price increases – rising global fossil fuel prices. It’s the global gas price, not green subsidies, that has primarily been pushing up energy bills. 60% of the increase in household energy bills between 2010 and 2012 was caused by this.

It is incredible that Davey should argue that the government is not to blame for rising energy bills, but that rising fossil fuel prices are. If prices can be brought down or stabilised, as Davey argues, by building wind farms and other renewables, why can’t they be brought down by building more capacity in conventional energy production? After all, the wind above our heads is as ‘free’ as the coal, oil, gas and uranium beneath our feet. The cost comes from turning something useless into something useful, and getting it from where it is to where it is needed. Emphasising restraint, and disincentivising conventional and cheaper production of energy (or conversely, incentivising renewable energy) will have the inevitable consequence of limiting the capacity of conventional energy production, pushing prices up. The scarcity of conventional fuels is a product of policy, not a fact about the world. Davey’s and DECC’s do not count the opportunity cost created by their policies.

The TPA’s reply is here.

The Liberum Capital estimate of the likely increase in total power costs is realistic. Their estimate is based on reasonable assumptions about the amount of investment needed; the higher profits in the energy sector needed to pay for that investment; and the higher prices needed to pay for those profits. Given the challenges facing the nuclear programme and the high costs of offshore wind, their estimate seems conservative.

Liberum’s analysis is pretty solid. In summary, it argues that the EMR bill will transfer risk from investors in renewable energy to the consumer. Investors have not been persuaded by the (current and previous) government’s claims that they will continue to support them, nor by the performance of renewable energy technology or policies where they have been tried (and they have failed) elsewhere. Although many wind farms and other green energy projects have been developed in the UK, the UK’s progress towards meeting its emissions reduction and renewable energy targets are short of expectations. Hence, the constant refrain of ‘investor certainty’ in the Houses of Parliament.

But you don’t even need to take Liberum’s word for it. The Secretary of State for Energy & Climate Change’s own dyscalculia should be enough to persuade you…

During his grilling by Andrew Neil, Davey made the following comment:

Ed Davey: If our policies were as expensive as you suggested, we would obviously want to look at them, but – the figure you gave at the top of the programme. You said that our policies are putting £112 on people’s bills. well, let’s look at that.

Andrew Neil: That’s your figure.

Ed Davey: I’m about to – I’ll give you the breakdown of that. The vast majority of that £112 is tackling fuel poverty, making people’s homes warmer. That’s a no-regrets, because it reduces energy bills long-term. That’s what I mean. A lot of the policies we’re doing you should do anyway. Only a small part of that £112 that you mentioned, which you tried to say was the cost of climate change – completely falsely, I have to say – only a small amount is in subsidising renewable and low-carbon energies. That’s why we’re taking a very rational, sensible, moderate approach to this.

Davey is trying to claim that his policies will reduce bills, given the fact of rising prices on energy markets. Even leaving aside the problems of this assumption, we can see that this is nonsense. Not even Davey is talking about an absolute reduction in bills, but a reduction only relative to their hypothetical scenario of rising energy prices.

Davey is right to say that the contribution of ‘subsidising renewable and low-carbon energies’ to prices rises is small. It is, in absolute terms. But fundamental to his broader argument is the claim that energy bills will be reduced by reducign demand through energy efficiency measures. Hence ‘The vast majority of that £112 is tackling fuel poverty, making people’s homes warmer.’

Some people, living in some kinds of accommodation will be entitled to ‘free’ energy efficiency measures. But this means someone else has to pay for them. Another failed policy — the Green Deal — that only launched this year is the government’s attempt to get even more people to reduce their energy needs.

Bus as has been argued here before, ‘efficiency’ is a fickle concept. Efficiency depends on what we count as good and bad. Clearly, on the green measure, ‘efficiency’ is measured only in terms of energy. But what if it was, in the final analysis, better to have cheap energy and energy inefficient homes, than to have expensive energy and efficient homes? This is the calculation I made last year in response to demands from Quango, Consumer Focus, that a whopping £55 billion be spent on improving the energy efficiency of the UK’s poorest 9 million homes. It turns out it would be much cheaper just to build some power stations and give those people electricity for ‘free’.

The Green Deal allows homeowners to take out a loan, attached to the property, to fit energy saving measures such as insulation and heating. But, noting the caveat about how ‘efficiency’ is measured above, the loan is conditional:

The key principle, or golden rule, for accessing Green Deal finance is that the charge attached to the bill should not exceed the expected savings, and the length of the payment period should not exceed the expected lifetime of the measures. This is not a government guarantee, but a guideline for customers that, typically, they should be able to expect to gain more efficient, less wasteful properties with no additional net cost from the Green Deal.

The cost of Green Deal loans is 7%. So if you borrowed £8,000 over a period of 25 years, you’d be paying back your original £8,000 plus £8,635 interest — a total of £16,635, or £56 a month for 300 months.

That means you’d have to use £56-worth less electricity and gas every month to make the loan worthwhile — or £672 a year. This is roughly equivalent to a half an average domestic energy bill for a year.

Let’s assume that it is possible to find a 50% reduction in a home, for a £8,000 investment in efficiency measures — though you wouldn’t have much change after some insulation and a new boiler. Notice that — HURRAH! — your energy bill has gone down, but the amount you pay every month has not. The home owner is now paying the gas and electricity companies, and the loan company.

And then, that’s before we’ve taken into account any future price rises. You may have cut your energy use by half, but you still have to pay for increases in energy prices. If the TPA’s claim that energy bills will increase to £2000/year by 2020 is correct, your bill will still rise by a further £400 or so.

Some perspective on historic prices may be useful here.

Up until 2005, the average bill for electricity and gas for a domestic consumer, paying by direct debit was £600. It’s now more than twice that. And between now and 2020, it will be three times that. And into the 2020s, it may even be four times the amount paid in 2005. The energy minister may want to deny responsibility for it, but now energy companies are beginning to refuse the blame put on them by Davey and his colleagues. According to the Telegraph today,

A household’s energy bill will rise from £1,247 today to £1,487 by 2020 in real terms – not taking into account inflationary increases – if usage remains static, npower warns in a report. Costs caused by government policies such as subsidies for new wind farms and energy efficiency schemes will be the main driver, adding £144, it claims.

Admittedly, NPower’s claim is substantially lower than the TPA’s. Nonetheless, it demonstrates that fewer people than ever think that the government’s policies are likely to reduce bills.

And it’s not as if Npower are against the government’s policies. NPower announced:

“Government and energy suppliers need to be much clearer about the facts behind rising energy costs, so we can present one clear message to consumers: energy costs will rise, and the only way to control of this is taking action to reduce consumption.”

So, NPower really only have themselves to blame for the government’s attempts to explain energy companies as the reason for rising energy prices.

“Government policy is rightly delivering the transformation we need to address the UK’s poor housing stock and encourage investment required in new infrastructure – but achieving these aspirations comes at a cost, and this is what needs to be clearly communicated to consumers. The fact is that if people don’t take action to reduce energy consumption, their bills are going to rise. If we can’t be upfront about that, we won’t be able to convince people to make big changes to be more energy efficient.”

Who are NPower to say that the government’s policies are ‘rightly delivering the transformation we need’? The idea that the energy company is concerned about rising energy prices is far-fetched indeed. It is manifestly the case that a return to 2005 prices would do more to improve housing stock than would be done by transforming that stock itself. There should be democratic debate about the government’s priorities

Instead, there are edicts from the annointed. The possibility of increasing productive capacity, or to prioritise lower energy prices is not given consideration by NPower, who take as ‘rightly’ the government’s policies. And it’s not given consideration by the Government, whose Secretary of State for Energy and Climate Change instead invents counter-factual arguments about rising energy prices that have no basis in fact, and who resists criticism by recourse to words like ‘crackpots’ and ‘conspiracy theorists’. And when that fails, he goes on TV to reveal he really doesn’t have a grasp of the debate.

The people left out of this of course, is the public. And their attitudes towards energy companies, the government and policies has been measured by the UK Energy Research Centre (UKERC) in a new report out today. According to UKERC, the research,

… funded by the UK Energy Research Centre (UKERC) and carried out by a team from the Universities of Cardiff and Nottingham, reveal that people in Britain are fully supportive of the idea of energy system change.

Professor Nick Pidgeon, who led the research team, said: “Our participants saw the bigger picture of energy system transformation, and they were overwhelmingly committed to moving away from fossil fuels towards renewable forms of energy production, and to lowering energy demand”.

The research highlights key factors that influence public assessment of proposed changes. From examining these factors, the research shows that the public favours changes that are: energy efficient rather than wasteful; protect the environment and nature; are reliable, accessible and safe; allow consumers a certain amount of autonomy and power; are socially just and fair; improve on what has gone before; score well in terms of quality and performance; and, fit with a long-term, sustainable trajectory, rather than being just a short-term fix.

The research is so much waffle about opinions on Motherhood and Apple Pie. But there you have it… According to independent academic researchers, the public apparently supports the UK’s climate and energy policies…

But wait… Who are the authors? Well, according to Professor Nick Pidgeon himself:

I am Professor of Environmental Psychology and Director of the Understanding Risk Research Group within the School. I work on risk, risk perception, and risk communication and as such my research is interdisciplinary at the interface of social psychology, environmental sciences, and science and technology studies. I am currently researching public responses to energy technologies (e.g. nuclear power, renewable energy), climate change risks, and climate geoengineering. I have in the past led numerous policy oriented projects on issues of public responses to environmental risk issues and on ‘science in society’ for UK Government Departments, the Research Councils, the Royal Society, and Charities. I am currently a member of the UK Department for Energy and Climate Change’s Science Advisory Group (SAG), and theme leader for the Climate Change Consortium for Wales.

Why didn’t UKERC just ask Ed Davey to do the research? This is transparently polic-based evidence-making.

The fact that Pidgeon’s academic and activists lives converge rather more than they probably ought to is well known. Moreover, the academy has ever more sought the academy’s authority.

For instance, what Pidgeon doesn’t admit on his staff profile page, nor in his evidence to the Science and Technology Committee’s inquiry on “Climate: public understanding and its policy implications” is that he is also on the Public Interest Research Centre’s Climate Change Communication Advisory Group (CCCAG). The PIRC claim to be a ‘an independent charity studying & communicating vital global issues’, but are, on any definition, an activist organisation.

CCCAG’s aim is to use current academic research and practitioner-based expertise to best inform government and non-governmental climate change communications and engagement.

in 2010, CCCAG’s advice to the UK government included the following:

Private-sphere behavioural change is not enough, and may even at times become a diversion from the more important process of bringing political pressure to bear on policy-makers. The importance of public demonstrations of frustration at both the lack of political progress on climate change and the barriers presented by vested interests is widely recognised – including by government itself. Climate change communications, including government communication campaigns, should work to normalise public displays of frustration with the slow pace of political change. Ockwell et al (2009) argued that communications can play a role in fostering demand for – as well as acceptance of – policy change. Climate change communication could (and should) be used to encourage people to demonstrate (for example through public demonstrations) about how they would like structural barriers to behavioural/societal change to be removed.

In other words, the CCCAG’s advice to government was to actively encourage the public to actively encourage the government to encourage the public… etc.

The infinite recursion of environmentalism’s logic reflects the extent to which environmentalists have their heads stuck up their backsides. Here is Pidgeon, trying to explain how climate alarmism can be made to work:

In the video, Pidgeon evinces a set of theories about the public that have become known as ‘nudge’ — a practice that seeks to elicit the public’s obedience with policies. This varies from ideas about how to construct social norms, through to strategies to ‘communicate’ ‘information’ to people who might otherwise ignore it. There are two problems with this. First, it demonstrates a very cynical view of the public — that they can be ‘engaged’ given only the correct strategy. Second, it seems to posit an idea of politics in which the public must respond to the political establishment’s desires — a total inversion of normal politics.

As I’ve pointed out to Adam Corner, Pidgeon’s colleague at the Understanding Risk Research Group in Cardiff, it seems odd indeed that the Understanding Risk Research Group do not understand the predominance of risk in contemporary politics as a political, or problematic phenomenon. As the video shows, Pidgeon’s only criticism of ‘climate porn’ is that it might not be an effective strategy in ‘communicating’ or ‘engagement’. Thus, Pidegon and Corner are oblivious to their own politics. They believe that the compact between the state and the academy in the era of fear and risk-based politics is a Good Thing. They don’t want there to be a debate about policies, and the science and values that underpin them.

So there we have it — the muddled minister, being advised on energy policy by activists academics, and energy companies who are more than happy to get behind any policies that promise ‘investor certainty’.

1 Comment

  1. Alex Cull

    There’s a full transcript of the Ed Davey/Andrew Neil exchange on Sunday Politics, here:

    (There may still be a few typos and minor corrections to be done, but should be more or less accurate now.)

    I’ve also started a transcript of an interview yesterday, on BBC Radio 4’s Today programme, with RWE npower’s CEO Paul Massara, which you might find of interest:

    I think what we’re trying to say to consumers, and make people aware, that effectively there’s a transition to a low-carbon economy, and that means that we’re going to have a balanced mix in our generation portfolio of onshore and offshore wind, biomass, nuclear. But the result of that is that prices are going to go up. And I think it’s really important that consumers are aware of that, so they can make choices to cut energy and make sure that they are as energy-efficient as they can be.

    It’s interesting that people having to cut energy usage because it’s just too expensive is framed as people having the power to “take control” and “make choices”.


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