Source: BBC Radio 4: Today Programme
URL: N/A
Date: 23/07/2012
Event: Treasury accused of sabotaging UK government's clean energy policy
People:
James Naughtie: Now, the cross-party Commons Energy Committee is accusing the Treasury of sabotaging the government's clean energy policy, by taking a stand that it says is going to put up prices for consumers rather than take them down. Tim Yeo is the Conservative chairman of the committee and can explain its complaint. Good morning.
Tim Yeo: Good morning, James.
James Naughtie: It is quite a serious complaint, I mean, if you are accusing the Treasury of actually sabotaging the policy of another government department.
Tim Yeo: Well, the Treasury didn't get off to a very good start with the committee, because it refused to send a minister to appear before us, and then -
James Naughtie: You can summon one, if you want, though.
Tim Yeo: Well, we asked, and they'd asked twice actually, and they didn't come. And we put questions to them in writing, which they didn't answer. So it was difficult to actually find out what their -
James Naughtie: Well, that's pretty disgraceful, isn't it? Can't you - I think people used to send a sergeant-at-arms with a sword, to get them there, didn't they?
Tim Yeo: Well, we were disappointed that they didn't want to argue their case in person, but they said they would rely on the Department of Energy to do it for them. I think our concerns are, firstly, the bill has very little in it about energy efficiency. Cutting demand for energy is by far the best way to save money and to cut carbon emissions. And there's very little in the bill that addresses that at all. That's a very serious omission. In terms of the - what appears to be - intervention by the Treasury, it concerned in particular what are called contracts for difference, which is the way in which low-carbon electricity generators in the future will be given extra support. When the government published its consultation last year, it suggested that the Treasury would act as the, sort of, back stop, a guarantor for these contracts, although the actual cost of them passes through to consumers. They're not going to do that now, which therefore introduces just an element of credit risk, which will make investors require higher return and thus directly raise electricity prices for all consumers.
James Naughtie: Do you think this is because they're eyeing up gas?
Tim Yeo: I think the Treasury are keen to see more gas-fired generation, and indeed my committee believes there does need to be significant new investment in gas. But we can't rely on gas alone to achieve our energy goals. It won't reach the cut in carbon emissions, which we need to 2030, if we rely exclusively on gas. It does also, incidentally - although we've got a nice, friendly supplier in the form of Norway, and the possibility of developing shale gas reserves, which we strongly support - it would expose us, nevertheless, to higher gas prices in the future. Asian countries are expanding very fast, using more gas and oil. World prices, therefore, are likely to go up. And of course there's also the possibility, in the 2020s, of a much higher carbon price, which would hit gas-fired generation.
James Naughtie: Well, we asked the Treasury for an interview, and we had much the same experience as your committee did. If the Treasury were to make public their reasons for this policy, what do you think they'd say?
Tim Yeo: I think it's probably about the theology [?] of the public accounts. I think that if they act as the guarantor for a contract for difference, in some way that is theoretically a liability on the Treasury, although in practice it wouldn't be. And I think, therefore, there's some difficulty about the definitions there. There is also another area of difficulty, which is called the levy control framework. That's designed to put a limit on the cost of any sort of support for low-carbon energy. Because they're not defining actually what constitutes - what will be included in that framework, the amount of money available under it, it introduces yet another area of uncertainty for project developers, who may spend tens of millions of pounds bringing a project forward and then find they don't qualify. So we'd like more clarity there, we'd like the amounts of the levy control framework set out at least eight years in advance, and the definition of what's going to fall within it.
James Naughtie: Tim Yeo, thanks.