Jeremy Nicholson, director of the Energy Intensive Users Group, has warned that the UK's energy policy risks decarbonising the economy through deindustrialisation more than switching effectively to renewable energy.
Speaking at an annual lunch hosted by the ERA Foundation in London last week, Mr Nicholson said that legislation and initiatives like the CRC Energy Efficiency Scheme and the Carbon Floor Price have increased energy costs to an uncompetitive level, with oil and gas prices already causing a serious headache for energy-intensive users such as steel, glass and ceramics producers. With some of these manufacturers, 20%-70% of their production costs are from energy. Even a slight rise in cost or an extra environmental tax can be very damaging.
While the economy is in such a fragile state of recovery, those at lobby group Energy Intensive Users Group (EIUG) say that manufacturers need support because of their potentially central role in kick-starting the economy. In the Civitas report ‘British Energy Policy and the Threat to Manufacturing Industry’ by Ruth Lea and Mr. Nicholson, they write that “There is no doubt that high energy prices have already been a factor in industry closures”.
Steve Elliott, EIUG Chairman, pointed out several months ago that the products of some energy intensive users are needed for the government to be able to push through a low-carbon agenda: “The products of energy intensive industries, such as materials for solar panels and wind turbines, insulation and electric car components are leading the transition to a low carbon economy. Forcing the development and manufacture of these products abroad will not help us remove carbon from the lifecycle of products essential to modern life. This measure also threatens the ability of the industrial customer base to provide demand for the same electricity generators the scheme is incentivising,” he said.
In his speech at the ERA lunch earlier in the month, Mr. Nicholson said: “If we tax too much and make fossil fuel energy generation expensive, we won’t decarbonise the economy by reducing carbon from power stations, we’ll decarbonise it by shrinking the economy!”
He lamented the way in which politicians “talk up the green economic opportunities and the ‘green jobs’, because it supports their cause and is good for public relations,” and then avoid discussing the costs of taxing fossil fuels so heavily. He also commented on the way governments of the past have tended to like ‘picking winners’ – supporting large companies. Nicholson accuses the current government of ‘picking losers’ by heavily subsidising the least efficient form of power – wind and solar power.
“The burden of an escalating carbon tax will fall on electricity consumers, making the UK an increasingly unattractive place to site manufacturing businesses. The government must come clean about the impact of the carbon tax on energy intensive industries and see what can be done in the context of the ongoing Electricity Market Reforms to mitigate the cumulative burden of this and other climate policies,” Nicholson said earlier this year on the issue of energy costing.
It seems that by ignoring the needs of energy intensive users, the government is in effect shooting itself in the foot.