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Budget 2010: good news for wind; bad news for green transport
25th March, 2010
As the fiscal dust kicked up by Alistair Darling's 2010 budget begins to settle, experts say they are 'surprised' by how 'un-green' the budget turned out to be
Yesterday's budget has been given a mixed reception by environmental campaigners and the renewable energy industry.
While headline plans for a green investment bank were welcomed by Renewable UK (formerly the British Wind Energy Association - the trade body for the wind, wave and tidal power industry), it believes the £1bn pledged is far below what will be needed to achieve the UK's 2020 green energy targets.
Accountancy group PricewaterhouseCoopers seems to agree, saying that the money was 'very small beer compared to the scale of new investment required in renewable energy'.
But Renewable UK strongly welcomed a £60m investment in British ports to help the development of the offshore wind industry. The move appeared to generate results almost immediately: today General Electric announced it will invest 340m Euros (£306.3m) in offshore wind across Europe, with a third of that money to be spent on a British manufacturing facility, which is expected to create 1,900 green jobs.
'We are very pleased, this is fantastic news,' said Dr Gordon Edge, director of economics and markets at Renewable UK.
British ports will bid for a share of the £60m in a competition set to be held in three months' time. The bids must include proposals for new wind energy manufacturing facilities in order to be successful. This will mean wind turbines built in the UK, Dr Edge said.
More cash needed
Renewable UK also estimates that 45,000 jobs could eventually be created in the UK offshore wind industry, if its ambition to reach a capacity of 20,000 megawatts (MW) by 2020 is realised. Under EU rules the UK must generate 15 per cent of its power from renewable sources by 2020. The investment bank has been launched to help achieve that aim. However, Dr Edge said the £1bn pledged by the Government - which it hopes will be matched by a further £1bn from the private sector - looks tiny when compared to the sums needed.
There are currently seven wind farms either under construction or with contracts signed and ready to begin construction, with a combined capacity of 2,000 MW. These alone will need around £5bn of investment, Dr Edge said. However, for the UK Government to meet the EU renewables target, around 10 times that capacity (or 20,000 MW of offshore wind) will need to be built by 2020. That will probably require investment of around £60bn, Dr Edge estimated. With additional borrowing, a £2bn stake in renewable energy could be turned into £12bn, but this still only represents a quarter of the total needed just to get the country to its 2020 targets.
'I'm pretty sure that we'll need more than £2bn going forward, but it's a damn good start,' said Edge.
Delays cost the climate dear
Renewable UK is also concerned about the possible delay in setting up the green bank, which could take at least 12 months. Energy companies have recently been selling stakes in wind farms, which Edge said was a sign of 'financial strain'.
For example, Dong has sold a stake in its Walney offshore wind project to Scottish and Southern, while taking a stake in Centrica's Lincs wind project off the coast of Lincolnshire. 'If these companies felt confident they had all the capital they needed, they wouldn't have to do that,' said Edge.
Richard Abadies, head of infrastructure finance at PricewaterhouseCoopers, added: 'The £2bn appears to be a signal of intent rather than a significant commitment in itself.'
Fuel tax becomes electoral football
PriceWaterhouseCoopers and the Campaign for Better Transport both attacked the Government for failing to give enough support to public transport. The decision to postphone the planned 3p rise in fuel duty by phasing the increase over 10 months from April was attacked by the Campaign for Better Transport, which believes more should be done to support low carbon forms of public transport and discourage private car use and air travel.
'The danger is that the next Government will abandon those increases altogether, so as not to alienate voters,' said executive director Stephen Joseph.
The Campaign argues that the cost of motoring has fallen in real terms by 14 per cent since Labour came to power in 1997. Although fuel costs have risen by more than inflation, these have been more than offset by falls in the real price of cars and other costs such as insurance.
Similarly, the average cost of air travel from the UK has fallen by 35 per cent in real terms since 1997.
By contrast, the cost of rail travel, seen as one of the greenest transport options, has risen by 13 per cent since 1997.
'We want the greenest forms of transport to be the cheapest and we already have the highest rail fares in Europe,' said Joseph.
Cuts to public transport expected
The Campaign for Better Transport also attacked the Government's failure to spell out where the significant cuts in public expenditure, expected after the next election, will fall under Labour. The Campaign is worried that subsidies for public transport, paid by both central government and local authorities, will be slashed and fares will rise.
'Politicians have said that areas like health will be protected from spending cuts, but public transport hasn't been ring-fenced, so it seems likely that it will face cuts, and the subsidies that bus operators receive could disappear,' said Joseph.
He added: 'We want the spending cuts to be concentrated on big road-building schemes that generate a lot of carbon and for public transport to be protected.'
Mark Schofield, global leader for sustainability and climate change tax at PricewaterhouseCoopers added, 'It is perhaps suprising that, given the strength of the green agenda being pushed by the Government, that they have decided to phase in the increase in fuel duty rather than bring it in in one go, as previously announced. It raises the question as to whether the actions necessary to change people's behaviour... will be followed through.'
Richard Gledhill, sustainability and climate change partner at PricewaterhouseCoopers, said: 'You can't criticise the Chancellor for the strong focus of the budget on the economy and investment, but the low priority given to climate change was very disappointing.
'There was only one mention of the low carbon economy, well into the second half of the speech, and nothing specific on green jobs, green skills or green taxes.'
Mark Jansen is a freelance journalist
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