Miliband faces energy dilemma

The Sunday Times
January 25, 2009
He is struggling to balance supply security with low emissions
Danny Fortson

It is not surprising that the past few months have been rocky for Ed Miliband. After all, Gordon Brown saddled him with one of the most difficult briefs in government when he appointed the 39-year-old former Cabinet Office minister in October to lead the newly created Department of Energy and Climate Change.
The government was being pilloried for its failure to rein in record-high household energy bills. The industry gave him little time to settle in, quickly criticising the new minister for not understanding the sector he was dropped in to oversee. Russia’s decision to cut gas supplies to Europe, meanwhile, stoked fresh concerns that Britain’s ageing infrastructure, much of it built in the 1950s and 1960s, would be shut down long before clean, reliable alternatives were built to replace it.
Yet Miliband - younger brother of the foreign secretary David - seems unbowed by the challenge. Indeed, he is set to take his nascent department into the most interventionist state role since the industry was privatised in the early 1990s.
“There are big opportunities here, but it does require a strategic role for government,” he said in an interview with The Sunday Times. “Part of it is what Lord Mandelson [the business secretary] has been talking about, which is having a more active industrial policy.”
It is up to Miliband to get the best out of the expected £100 billion that will be needed over the next decade to reshape Britain’s energy infrastructure for a low-carbon world. He is not convinced that, left to their own devices, companies will get it right.
“There are too many uncertainties associated with these investments for markets to do them on their own, even with a price on carbon, and that’s what we are working on,” he said.
This week he will make the first of a flurry of announcements that he says will keep Britain on track towards taming the three-headed hydra of energy security, pollution reduction and affordability.
Tomorrow he will unveil a short list of five proposals for the Severn Barrage, the controversial tidal scheme that has been knocking around for three decades but been repeatedly rejected over cost and environmental concerns. On Tuesday he will push ahead with Britain’s new nuclear building programme when he invites the industry to propose sites on which to build new nuclear reactors.
In recent weeks all the big six utilities have formed consortiums as they prepare to build what would be the world’s first new generation of nuclear reactors, outside France, in decades. The industry’s interest has been spurred largely by a concerted government effort to remove many of the obstacles that had for so long held back development here.
“We are not about subsidising new nuclear, but we are about breaking down the barriers,” said Miliband, referring to the recently passed energy and planning bills. “When you see the companies that are coming forward, there is a pretty clear enthusiasm that new nukes make economic sense for them.”
It is a model that Miliband hopes to replicate with the renewables industry. “The low-carbon future is in my view around nuclear, renewables and clean fossil fuels, but we need to create a top-down framework to incentivise the market,” he said. “We have shown on nuclear that we can deliver on these things, and we are seeking to do the same on renewables,” he added.
In the spring the Department of Energy will publish its low-carbon industrial strategy paper, detailing a comprehensive approach that will include subsidies for new technologies and that aims to create thousands of new “green” jobs.
But won’t all this lead to ever-higher household bills? Not necessarily, he argues. “The best answer to upward pressure on energy prices is energy efficiency and we are in the foothills of what we need to achieve in this area,” he said. “In the 1970s Britain converted to North Sea gas. I confess I don’t remember it that well - I was very young - but that sort of house-by-house, street-by-street programme is what we need to think about for energy efficiency.”
Yet, with roughly a third of Britain’s generating capacity set to close over the next 15 years, the industry has warned that renewables will not be enough and that without new fossil-fuel plants the country faces the real possibility of the lights going out.
It is in this context that Miliband will have to make what will surely be one of his most controversial decisions: whether to approve an application by Eon to build a new coal-fired power station at Kingsnorth, near Ashford in Kent.
The plant would be the first coal-fired station to be built in Britain for more than three decades. Eon has entered the project into a competition under which the government will award one company several hundred million pounds to build a carbon capture and storage (CCS) plant to demonstrate a technology that promises to strip carbon out of power-station exhaust and bury it underground.
Miliband refused to say if he would award the CCS money to Eon, or if he would approve the plant if it lost the competition. “It is very difficult to reconcile security of supply with our low-carbon obligations, but I don’t want to anticipate what I have to announce to parliament in the coming weeks and months on our approach to this issue because it is a very sensitive matter.”
He admitted, however, that he thinks “Britain should lead by example on CCS”. Giving the green light to a dirty new coal plant would not be seen as setting a good example.