Britain is losing its way in cutting carbon

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Editor’s note: On 8 September the results of the government’s fifth renewable energy auction showed that there were no bids for offshore wind farms.

STEND ON THE cliffs above Happisburgh, a small town in Norfolk, and imagine the electricity to power a city flowing beneath your feet. About 80km from the coast stand 130 turbines, each over 300 meters high, or the height of three Big Ben clock towers stacked on top of each other. Cables emerging from the seabed go underground between flint-clad towns, carrying energy for 1.5m homes.

Photo: The Economist

That, at least, was the plan. Boreas Norfolk was intended to be one of the largest offshore wind farms anywhere. Vattenfall, a Swedish developer, won approval for it in 2021. The scales were to start turning by 2027. No more. In July the company stopped the work due to high costs. Other projects are in doubt. The results of the government’s latest renewable energy auction were also expected soon after The Economist it was published. Compared to previous rounds (see chart), few, if any, offshore wind projects won contracts.

If so, that would be a clear sign that the once impressive progress towards net zero by 2050 is in danger of collapsing. Previous gains have come partly because manufacturing has declined and dependence on coal was kicked out early. But as other countries try to speed up their own transitions, policy-making progress has slowed. In June the Climate Change Committee, a watchdog, warned that Britain is at risk of missing its next targets.

One problem is the lack of direction on the environment from Rishi Sunak, the prime minister. In July, following a by-election victory that was seen as rejecting London’s ultra-low emissions zone (ULEZ) for vehicles, Mr. Sunak visited policies, such as the need for more oil from the North Sea, seen as encouraging by environmentalists. He suggested to ministers that zero net policies could be watered down. On 31 August he named Claire Coutinho as his latest energy secretary, the fourth occupant of the post in just one year.

How important is his lack of interest? He is disturbed by others. Some in his party hope to paint Labor politicians as eco-zealots. But he also has to contend with backbenchers, including his predecessor, Liz Truss, who want more green action. That group led the government to say, on September 5, that they would ease the effective ban on the construction of onshore wind farms in England. Despite this, there is growing concern that green progress will stall.

Start with offshore wind, the heart of recent green efforts. Over the past ten years, and four rounds of auctions, the cost of electricity from such areas has fallen by almost 75%. Only China has more offshore turbines. Last year wind, mostly offshore, provided more than a quarter of all electricity. Boris Johnson, the prime minister until 2022, had ambitious goals to build capacity to 50 gigawatts by 2030 – it is 15 today.

That was always going to be difficult, requiring three or four new Norfolk Boreases a year. With other rich countries also keen on the technology, there is fierce competition for skills and parts. Inflation has also hurt. Vattenfall, Orsted, a large Danish wind farm developer, and others say construction costs are up 40% from last year. The price of steel is a problem. Another is suppliers that are too long, including those of boats needed during construction.

Most analysts believe that construction costs will remain high globally. Despite this, the British government refused to raise the maximum strike price – the highest bid allowed to developers in a reverse auction, in which competitors compete to offer the lowest price – from last year. He may be worried about giving any thought to rising consumer bills to support green projects. If so, that was wrong, says Jess Ralston of the Climate Energy and Information Unit, a think tank. With gas prices expected to remain high and no obvious alternatives, offshore wind projects continue to offer savings to consumers. Ministers may also have been influenced by developers crying wolf in the past, saying that a price could not be achieved just for a lower bid.

If few, if any, offshore wind projects are approved after a renewable energy auction, that would create uncertainty for industry suppliers. Developers can move away to other markets: Germany completed its biggest auction round to date in July. And even if a project or two wins support, if prices are too low for the developers to deliver, they may decide to delay it.

The outlook for onshore wind farms may seem brighter. But these are much smaller than those at sea and at least there will be strict planning restrictions, even if these are not as strict as before, when one complaint from a local resident would scuttle a project. In England, only two land plots have gone up in the last three years, on land owned by Keele University. Scotland has been more welcoming, but still cannot match the scale that can be achieved at sea. Across all technologies, developers say a lack of investment in the grid is a major barrier to getting more renewable energy.

Mr Johnson had talked about relaxing planning regulations, or finding ways to reward areas where there are wind farms, but no specific proposals have yet emerged. In Norfolk, councilors complain that local people see no benefit from disruption in the county. Other countries do a better job of dangling carrots, for example with developers paying a proportion of their annual profits to communities.

Two other indicators show Britain’s movement. The first is about heat pumps instead of domestic gas boilers. Last year 69,000 of these were sent in, while Germany managed to send in 236,000. A target to get 600,000 into British homes every year by 2028 is almost certain to be missed. Regulations and taxes that apply to electricity, but not to gas, discourage switching. Lack of skilled engineers to install the pumps is another constraint.

The second is the administration of the British emissions trading scheme, which was introduced after Brexit to replace the one used in the European Union. After closely monitoring the European carbon price in the past, the British price has been moving lower this year. Part of the reason for that is that, from July, the government said it would issue more allowances to polluters. That gives investors in Britain less incentive than those in Europe to seek green projects.

The pace has not slowed in all sectors. Even though the drive to decarbonise the grid is slowing, the move to electric cars continues: a fifth of cars bought by Britons in August were electric. It helps that electric car prices have been falling globally, but also that Britain is sticking to its promise to end the sale of petrol and diesel cars by 2030 and has set a target of -into manufacturers to produce more electric vehicles. Some Conservatives have called for both to be dropped. Instead Mr Sunak listened to the car industry – particularly the Tata Group, which announced plans in July to build a battery factory in Somerset, backed by a huge subsidy.

More tensions will emerge this month, as the power bill reaches its final stages in Parliament. Ms Coutinho is under pressure on issues such as stopping oil boilers in homes (Duncan Baker, Conservative BP for North Norfolk, calling it “the rural ULEZ“). If Labor were to form the next government, they say they want all of Britain’s electricity to be carbon-free by 2030 – five years ahead of the Tories’ target. Another year of drifting would leave her with a lot to do.

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