George has got it wrong on Feed-in Tariffs

Following on from yesterday's blog, and ahead of today's Court ruling on Feed-in tariffs, here is Alan Simpson's response to George Monbiot's article on feed-in tariffs. Alan Simpson is a guest blogger, former Labour MP and is advisor to Friends of the Earth.

Part 2 - Feed-in tariffs

George's dislike for 'Feed in Tariffs' is visceral rather than analytical. To allow the dislike to spill over into describing the FOE legal challenge as 'misconceived' is to place himself in a position somewhere between the absurd and the obscene. The basis if FOE's challenge is simply that the government should not be allowed to make the law up as it goes along. Specifically, FOE argues that it is wrong for governments to assume a power to retrospectively change its own ground rules.

If you bought books on Amazon and then found the company charged you in full, but sent only half the books - claiming that book/distribution costs had suddenly doubled - there would be a flood of challenges to the legality of their action. The principle is that you cannot retrospectively vary a contract after entering into it. FOE's challenge is just this; that governments cannot retrospectively change legal undertakings any more than companies or individuals can. In the circumstances, DECC may find this uncomfortable. George may find it distasteful. But once you argue that the law should not apply to the things you dislike, you are on shaky ground.

Moreover, on practical as well as principled grounds, George continues to misrepresent or misunderstand the profound change in energy thinking that is embodied in the approach to feed in tariffs. If it had just been about pampering the middle classes the scheme would have gone on untouched. In Nottingham, I am a board member of one of the community energy projects installing solar roofs and using the proceeds to take houses on the estate out of fuel poverty. It is a company owned and run by one of the CIty's poorer communities. Some 15 months ago DECC officials made it clear that such schemes must not be allowed to overwhelm the FITs programme. By then, the government had turned it into a fixed budget scheme and the obsession was in not allowing the poor to get into the game and spoil it. This is at the core of the latest crisis review.

Local authorities and housing charities had begun to get their act together, realising they could take millions of social housing tenants out of fuel poverty by having 30% (or more) of their electricity bills coming from their own roofs and having an income stream that would pay for energy improvements to the properties themselves. DECC's proposed changes were designed to prevent precisely this scale of involvement.

The central issue is not the existing level of tariff payments (which everyone agreed had to be cut). The issue is the cap the government has artificially imposed on the scheme. The Germans have no such cap, relying instead on a much more transparent system of tariff rate adjustments that fall in line with the level of installations (and the falling unit cost of photovoltaic panels). Runaway growth has driven its own efficiency gains and wider gains across the whole German economy.

The core of the Monbiot argument is that, because FITs are paid out of energy bills, the whole approach is regressive; adding to energy costs but not to energy solutions. To run FITs on an even larger scale would only make it more so. So why would the sensible Germans want to run with something so foolish? The answer is that they see the energy future and we don't.

By 2020, Germany will have closed its nuclear power stations. George would have us bailing out the delusion for the rest of the century. The Germans are also constructing a new energy democracy, with millions of people becoming energy 'contributors', while Britain is set to prop up its existing energy cartel. German towns and cities are developing their ownin situ renewable energy systems rather than building more power stations. And communities across the country are reclaiming the ownership of their own energy distribution networks. In doing so, feed in tariff payments (that rapidly fall to market prices) are used to drive the transition from where they are now to where they want to be in a decade. What George regards as regressive, the Germans see as transformative.

More specifically, Germany has managed to use FITs to drive down energy costs rather than increase them. Initially, Deutsche Bank did a study showing that Germany's FITs programme delivered cost savings (in avoided energy consumption from fossil fuels) that were €800m a year greater than the costs of the whole programme itself. By decreeing that the German Grid has to take renewable energy before it takes nonb-renewable energy, the country has used (the 50GW of installed) renewable energy to take 25% out of peak demand (and peak energy prices). The result is to have broken the stranglehold big energy companies had over German energy prices, with German power prices lower today than they were 3 years ago.

As their monopoly profit levels tumble, I can understand why Germany's Big 4 energy companies are pissed off about this. I can see why Britain's Big 6 are in overdrive to prevent UK policy heading in the same direction. What is harder to fathom is the process that has transformed George from the scourge of oligopolistic dragons into their apologist. If today's UK energy tyranny is to be propped up it needs a Ministry of Misinformation to pretend it is the future rather than the past. DECC was always going to fulfil this role. Why George should wish to do so remains a mystery.

It is not FOE's legal challenge that threatens to blight the fuel poor and block pathways to the future. Beyond the courts, FOE wants a wider restructuring to bring all the benefits of the German programme to towns, cities, families and communities across Britain. To do so, we should begin from questions about the £175 added to household energy bills by energy companies this year rather than the £1 added by FITs. We need to create a market in non-consumption rather than more consumption. We need to empower people as energy generators not just as energy users.

The future will have to be shaped more around what we bring to the party than what we take from it. This is the big philosophical shift we have to address. Sadly, George's offerings subtract from this prospect rather than add to it. It is a position that is several sandwiches short of a picnic.


Alan Simpson

Advisor on energy and climate change policy