Source: BBC Radio 4: Today Programme
URL: N/A
Date: 27/06/2014
Event: Tim Yeo defends UK government's expensive green energy contracts
Attribution: BBC Radio 4
People:
John Humphrys: One day, we will get our energy from the wind and the sun, and maybe the waves, and it won't pollute the world, and it'll be cheap, Well, that is the great renewable dream. And in the meantime, well, the National Audit Office has just warned that the government is actually wasting money on renewables - quite a lot of money, awarding green energy contracts for projects that are so risky they might end up being cancelled, and being awarded without any competition. Well, Tim Yeo is the Conservative MP who chairs the Energy and Climate Change Select Committee, and he's on the line - good morning to you.
Tim Yeo: Good morning.
John Humphrys: Do you agree?
Tim Yeo: No, I think this is an unusually sloppy report from the National Audit Office. First of all, they overlook the fact that the total amount of support available for renewables is capped, and the cap was announced in the Autumn Statement of 2012 by the Chancellor of the Exchequer. So there's no question of consumers or taxpayers losing out as a result of these decisions. Secondly, the strike price - which is what the new system involves - sets a -
John Humphrys: "Strike price" meaning? Go on, explain...
Tim Yeo: It is a price which is paid to the generators, and they're different for offshore wind, onshore wind, solar, and so on. But that's pre-determined - now, there is an argument about introducing auctioning, in due course, and the government said it would do that. But, to begin with, to get the new system going, they set these strike prices, so the idea that some sort of competitive auction - bidding process should save money, misunderstands. Anyone can bid at the strike price. A number of people have. The one area, of course -
John Humphrys: But they're saying there wasn't, I mean, they're specific - they're saying there was not any price competition used in the decisions to award these contracts. And they were too generous, over too long a period of time, and they talked about £16 billion over the next 15 years - that's going to be the cost of it.
Tim Yeo: The strike price was set in advance by the government - there was no question of alternative bids coming in. As I say, they could introduce an auction process in due course, and I think they should. But, to begin with, to get the system going, get the market running, they have these predetermined strike prices. Now, I think -
John Humphrys: But that's the point, isn't it? Isn't that the point? We're now tied in to those strike prices - they didn't have to set them, as you've just suggested, in that answer - they didn't have to set them at that time, in the way they did.
Tim Yeo: Well, they had to set them in a way that would encourage people to bid, otherwise we wouldn't have any new investment in renewable generation. And I'm afraid a particularly crass recommendation, in paragraph 19 of that report, is to say the government should now take part, alter retrospectively the prices which these contracts are set at - that's the sort of principles of the banana republic which would completely destroy any investment in energy in this country at all.
John Humphrys: Hmm.
Tim Yeo: But the area which I think they are right on is that the government's allocated rather a big proportion of the total money in this first run - more than half all the available support is now committed to these projects, and that obviously reduces the scope in future for making decisions, by which time the strike prices may well be lower.
John Humphrys: And isn't the other problem that we are being - the government has been - simply too generous to the suppliers? If the projects are eventually profitable - as indeed they're expected to be, extremely profitable for the suppliers - there isn't any mechanism for the government to claw any money back. In other words, if they make a whole pot of money, we're not going to be able to say "Okay, we're now going to have some of that back", because the deal we've signed [laughs] leaves it all with them.
Tim Yeo: Not exactly, no, because the strike price is fixed - if the market price at which the electricity is sold in future is higher than the strike price, the generator then has to repay to the government that excess - so at least the government knows, absolutely, for certain, now, what that electricity's going to cost, each kilowatt-hour produced by solar or by offshore wind, we know what the price is, to begin with. That element of certainty is very helpful to the generators - it's also helpful to the government, who know the level of -
John Humphrys: And for the consumers?
Tim Yeo: Well, consumers, I think, need to understand that it is in Britain's interest to increase the proportion of energy generated from renewable sources. This greatly improves the security of supply, in this country. We import half our gas, nearly all our coal, at present, and having onshore solar power improves security. It also helps Britain achieve its legally binding greenhouse gas emission reduction targets.
John Humphrys: Tim Yeo, many thanks.