Energy policy and climate change policy are one and the same thing

Scottish Renewables Chief Executive Niall Stuart says our long-term commitments on climate change "can also underpin an industrial strategy for clean energy".

Ed Miliband might think it "plain stupid", but Theresa May's decision to fuse energy and business in one Whitehall department acknowledges two undeniable truths.

First, with 90 per cent of carbon emissions coming from energy used across power, heating and transport, energy policy and climate change policy are one and the same thing.

Second, the global transition to clean energy presents a huge opportunity for businesses all over the UK. With annual global investment at $280 billion and growing, it really is the environment and the economy.

So how do we deliver our international obligations on emissions, keep bills down for consumers and deliver new economic opportunities?

The first priority is to be clear about longterm direction.

The government's commitment to the Paris climate change targets has been one of the few constants in the shifting debate on the UK's place in the world since the EU referendum, but at this time business will take nothing for granted. So ministers can never repeat it too often.

But we also need a strategy to deliver.

The Paris accord requires a huge cut in the UK's CO2 emissions, with government having accepted the 57 per cent reduction by 2030 recommended by the independent Committee on Climate Change.

That is a giant transformation, with the committee suggesting we need to double renewable power to achieve it.

Quite simply, progress on that scale will be impossible if energy policy continues to be marked by tactical interventions (stop onshore wind, build new nuclear, deliver gas through the capacity market) rather than a comprehensive strategy designed to achieve overall outcomes and objectives.

The irony is that we already have a framework to deliver new clean power at scale at the lowest cost to consumers, the snappily titled Contract for Difference.

The move away from a fixed top-up for renewable projects to auctions for long-term contracts for power has already delivered huge reductions in cost, with much greater reductions to come, and brought forward significant new capacity of onshore and offshore wind and solar power.

Yet despite that success, government has excluded onshore wind and solar, now the two cheapest forms of new power generation, from the forthcoming auction round, focusing the £290 million budget on offshore wind instead.

That doesn't make sense for climate change, for the energy sector or for consumers, whether business or domestic.

We have yet to really see any strategic interventions on heat and transport, despite them together accounting for about 80 per cent of the UK's energy use.

The former will require a sustained, complex and coherent plan to transform the efficiency of our buildings, as well as the way we heat them, while the latter is potentially best served by simple incentives to consumers and businesses to switch to electric and hydrogen vehicles.

We have yet, too, to put any serious energy into perhaps the biggest challenge and opportunities of all: energy storage and flexible grid systems designed to marry daily and seasonal changes in demand with variable renewable output or inflexible nuclear power.

Those actions are all necessary to meet our long-term commitments on climate change, but they also can underpin an industrial strategy for clean energy.

Clear objectives for growth will deliver further opportunities for UK manufacturers, as recent investments in offshore wind manufacturing in Nigg, Machrihanish, Burntisland and Glasgow testify.

It will ensure that we protect the UK's place as the second-biggest provider of services to the global renewables energy sector.

And it will act as further stimulus for the economy, offsetting any slowdown in other areas of the economy in response to Brexit.

That's why it makes sense to marry business and energy policy, why policy matters and why we need keep up the heat on ministers to deliver our climate change targets in the way that best keeps bills down for consumers —and which maximises the opportunities for UK business and the economy.

This article first appeared in The Times Business section, July 19 2016.