Source: BBC Radio 4: You and Yours
URL: N/A
Date: 29/01/2015
Event: Dr. Robert Gross: "unless we get off fossil fuels, we're going to fry the planet"
Credit: BBC Radio 4: You and Yours
People:
Winifred Robinson: Falling petrol prices are helping with family budgets - according to Asda, which tracks what people spend, families have £15 more disposable income last month than they had in the same month in 2013. Cheap petrol and diesel make a lot of things cheaper. But not one important thing - renewable energy is now by contrast even more expensive than fossil fuels. The government's committed millions of pounds to encourage companies to invest in generating renewable energy, £300 million for the coming year alone, and investors have been promised a fixed price for any green energy they produce and for a fixed period, usually 15 years. So how's that all going to play out? Dr. Robert Gross is Director of the Centre for Energy Policy and Technology at Imperial College London.
Robert Gross: What we know is that, for various political reasons, oil prices in particular have collapsed. Gas prices tend to shadow oil prices, for a number of reasons. We don't know whether this will be a temporary phenomenon and we'll return to, kind of, increasing prices over the long term, but certainly a lot of decisions have been made, government policies have been put in place, on the assumption that gas prices and electricity prices in particular would stay quite high. And what we've seen in the last few months - which actually we knew, and surprisingly seem to have forgotten - is that fossil fuel prices are incredibly volatile.
Winifred Robinson: What impact, then, do you think that the current falling prices of fossil fuels are going to have, on the subsidies for renewables?
Robert Gross: It makes life complicated for both investors in renewables and, I think, for the government. The difficulty for the government arises from the fact that they've effectively offered a guaranteed fixed price to renewables and to new nuclear power stations. So as, and if, the price of fossil fuels comes down, and if it stays low for a sustained period of time, then the amount of subsidy that we're going to need to provide - if we're going to continue to meet our aspirations for renewables - is going to need to increase. And that means that the amount that households will need to pay to support renewables will need to increase, as well, or we'll need to find cheaper ways of doing things, or we'll simply need to do less renewables.
Winifred Robinson: You mentioned the possibility of the government moving the goalposts, changing the rules about subsidies. Could the government change the rules about subsidies, when so many investors have been promised a return, over long periods?
Robert Gross: They'd be extremely unlikely to reduce the amount that they paid to technologies that have already been given a contract. I think, if they did that, then investors would be running from Britain, not just in terms of renewable energy but all sorts of other investments that depend upon policies as well. I think what the question really is, is what we really offer renewables in the future, so, if you like, the projects which have yet to be built and the things that we haven't contracted for. And what this is likely to mean is that we have to focus more on the cheapest options. So, rather than going after things that we're keen on for the long term, like for example offshore wind, that we have to focus on things that we know that we can deliver cheaply in the short run, for example onshore wind - the government doesn't like onshore wind because of the impacts on the landscape, it therefore prefers to put more investment into offshore wind, but of course, for perfectly understandable reasons, offshore wind tends to be a lot more expensive than onshore wind.
At the moment, the cost to the average household of the subsidies that go to renewables amounts to about £50 per year. And just to draw a comparison, although fossil fuel prices are going down at the moment, when they went up dramatically, from about 2005 onwards, that actually increased bills by nearly £300 per year over that period. So, at the moment, the level of subsidy isn't enormous - I think the real concern is it's expected to rise, over the coming years, as we try to do more and more with renewables, to meet our climate change goals.
Winifred Robinson: What do you think it means for the future of fracking for shale in the UK, because the government's very keen on investing in that, and that again will require a public subsidy, and there's quite a lot of opposition.
Robert Gross: To be honest, I think that falling international gas prices make the case for fracking and shale gas in the UK really quite questionable. Fracking, and unconventional oil and gas in general, only really make sense in a world of high oil and gas prices - if you like, they're marginal technologies. It's very easy, actually, and very cheap to pump oil and gas out of a large oil field underneath the desert. And it's much more difficult to extract, and much more expensive to extract, shale gas or shale oil in the UK, in the US or anywhere else. And so, how long this reduction in price will last remains to be seen, but if we are in a period of sustained low prices, I think that the case for fracking in the UK becomes extremely questionable.
Winifred Robinson: And what about the case for investing a lot of public money in new nuclear power stations - is that questionable as well?
Robert Gross: I think investing in nuclear and investing in renewables - we're doing it for a number of reasons. Partly we're doing it because fossil fuel prices are volatile. So it's a bit like a fixed-price mortgage - you might feel that you're out of pocket if the interest rate declines but you might be quite pleased if the interest rate goes up. And fuel prices, like interest rates, are quite unpredictable over the long term. The second thing i think is very important to bear in mind, is that we're doing renewables and we're doing nuclear power because we're concerned about climate change and we're concerned that unless we get off fossil fuels, we're going to fry the planet. The challenge, I think, the real challenge, is one for technology, one for innovation - what we need is to make renewables cheaper. And if we can do that, then a lot of these problems and difficulties and burdens on consumers will go away.
Winifred Robinson: Dr. Robert Gross. We asked the Department of Energy and Climate Change about the comparative expensiveness or cheapness of renewables, and they said that they allow for falling oil and gas prices when they work their subsidies out, and they also said that the guaranteed fixed price for renewable energy works both ways, and if the price of fossil fuels rockets in the future, the fixed prices that have been agreed now with the green generators will seem cheap by comparison.