21 October 2015: Dieselgate II? New subsidies for dirty diesel generation

The Conservative government’s climate and energy policy is broadly right. It backs an ‘all of the above’ approach to decarbonisation, supporting energy efficiency, carbon capture and storage, nuclear and renewables. However, being broadly right is not good enough if implementation is poor. At the moment, implementation of climate and energy policy is indeed poor.

This is not intended as an attack on the Conservatives. For most of Labour’s 13 years in power (1997-2010) policy was ok but delivery was dreadful, which is why in 2010 the UK got a lower proportion of our energy from renewables than any other EU country except Malta and Luxembourg. Under the coalition (2010-15) delivery of renewables capacity was much better. But the prospect of new subsidies to dirty diesel is a result of the 2013 Energy Act, which happened on the Lib Dem watch.

Now it is a Conservative majority government getting things wrong. The Green Deal energy efficiency scheme, introduced by the coalition, was too complicated and the loans offered were not low-interest enough. So it was not wrong to close the Green Deal, but it was wrong to do so without a replacement policy. The coalition created a Green Investment Bank in 2012, to reduce the cost of capital for developers wanting to build low-carbon energy systems or upgrade the UK’s appalling (in energy terms) building stock. Now the Bank is to be privatised, and the Government is proposing to remove any requirement for it to lend only to green schemes.

The Government is also proposing to cut subsidies to renewables. Again, this is not wrong in principle. The cost of many renewables, notably solar PV, has fallen dramatically in recent years. But the Department for Energy and Climate Change is currently consulting on subsidy reductions which are too steep, too fast. The solar industry is complaining vociferously. ‘So what?’ you might ask ‘that’s what subsidy junkies do when their subsidies are cut’. Well, there is politicking and lobbying going on by the trade associations. But several solar companies have already closed down, blaming the proposed cuts and regulatory instability. Hard to dismiss going into receivership as a campaign tactic.

Nuclear energy is a necessary part of decarbonisation. But the reactor design proposed for Hinkley is too complex and so too expensive. (To be fair, it was a Lib Dem energy secretary who gave planning permission to Hinkley, and the planning/regulatory process began under Labour ) New nuclear power stations require subsidy, and will continue to do so until there is a decent price on carbon (at least three times the current UK price). Clean energy subsidies are needed, but the Hinkley deal is a wasteful mess.

Subsidies are also needed for back-up capacity, to make sure that the lights stay on when the wind is not blowing and the sun not shining. The coalition introduced such subsidies under the capacity mechanism in the 2013 Energy Act. This Act also introduced an Emissions Performance Standard, a new regulation ensuring that new generation is not high-carbon, so ruling out new coal without CCS. What the coalition failed to do was to ensure that the new capacity mechanism subsidies go only to plant meeting the Emissions Performance Standard. Gas is the most economically efficient way to provide back up, and the least climate-damaging. It was clear at the time that the capacity mechanism would mean new subsidies to old coal. I complained about this in early 2014 (http://climateanswers.info/2014/02/coalition-subsidies-to-keep-the-coal-fires-burning/)

I did not warn about new subsidies to diesel generators. To be honest, I didn’t consider this option. I assumed that no government would be silly enough to give more public money to dirty diesel. OK, diesel power stations are not likely to be in urban areas, so toxic emissions will be less damaging. But not safe, and pollution moves.

Now I’ve been told (by Sandbag https://sandbag.org.uk) that, under the capacity mechanism, subsidies may go to nearly 3 GW of diesel generation. That’s equivalent to three large power stations. The new diesel plants are intended to be used only when necessary, when electricity demand outstrips supply. But once they’re built, the Government will have no say over how often they are used. If there’s money to be made, the diesel plants will be switched on.

So, the coalition government’s Energy Act has introduced a system which could massively undermine UK climate policy. Luckily, the Conservative government now has a chance to correct this mistake. Another energy bill is going through parliament. This afternoon it is being considered by the House of Lords. Labour’s shadow energy and climate minister in the Lords is Bryony Worthington, who is also director or Sandbag (and indeed a trustee of Weinberg Next Nuclear). Bryony will propose an amendment so that all the power stations, however small, that are given capacity mechanism payments will have to pay the carbon price, be required to minimise air pollution and be covered by the Emissions Performance Standard.


The unelected House of Lords exists as a ‘revision chamber’. It is not allowed to resist laws which were promised in the manifesto of the governing party. There was nothing in the Tory manifesto promising to subsidise dirty diesel. Peers who care about climate change and/or human health should support this amendment. This should not be a party political issue.

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