In 2015 the world came together to agree to the landmark Paris Climate Agreement aimed at keeping global temperature rises to 1.5 degrees above pre-industrial levels.
And just in time: we are facing a climate crisis. 2016 is set to be the hottest year on record and greenhouse gas emissions globally are still not falling. We are seeing the impacts of climate change much earlier than anyone predicted – around the world and at home.
That’s just one reason why the Labour Party must stand for a different Britain – one that plays a leading role internationally, and committed to cutting carbon emissions at home. We would once again make Britain world-leading in climate action.
In power, my government will:
- challenge the Big 6 oligopoly by empowering communities and local authorites to generate their own green energy;
- use our £250 billion National Investment Bank to lower the cost of capital for renewable energy projects;
- implement a comprehensive industrial strategy to generate 1 million high-quality new jobs in Britain’s renewable energy and energy efficiency industries, driving a green industrial revolution;
- support the development of world-class offshore renewable energy industries;
- ensure strategic investment into industries with a long term future in all regions of Britain will more than compensate for any job losses in unsustainable sectors;
- work closely with workers, communities and unions to manage the low carbon transformation in a way that is fair to those affected.
Renewables and conservation at the heart of our energy future
Our broken energy system is holding Britain back. Starved of investment by the Big 6 energy companies, our electricity system is expensive, inefficient and polluting and in urgent need of renewal to keep the lights on.
Yet we have enough wind, wave and sun potential not only to power our economy, but to export. Scotland recently met more than 100% of its electricity needs with renewable energy alone.
A nation of draughty homes has left seven million households seriously struggling to pay their energy bills and yet we have the skills, technology and people needing quality jobs to fix them. 29,000 people die early every year from air pollution primarily caused by burning dirty fossil fuels. We will deliver clean energy, affordable heating and electricity – energy for the 60 million, not the Big 6 energy companies.
This will mean promoting the growth of over 200 ‘local energy companies’ within the next parliament, giving towns, cities and localities the powers they need to drive a UK clean energy revolution.
At the same time we will support the development of 1,000 community energy co-operatives, with rights to sell energy directly to the localities they serve, with regional development bank assistance for grid connection costs.
Lowering the cost of capital for renewables
Since the main costs of most renewable technologies (wind, solar, wave and tidal) are initial capital costs, reductions in the cost of capital have a significant impact on the overall cost of the technology involved. The Committee on Climate Change (CCC) estimates that well over 90% of the cost of solar PV is capital cost, while around 80% of wind long-run costs are due to capital.
The CCC’s baseline costings allow for a significantly higher cost of capital than is typical in evaluating investment projects, to reflect the uncertainties associated with policy, financing risk, and technological maturity. This implies a baseline forecast of a 10% discount rate – far above the more usual Treasury Green Book figure of 3.5% used to evaluate public expenditure.
However, with the new National Investment Bank operating as a stable vehicle for long-term, cheap loan financing, and with gilt rates themselves presently at an all time low, the financial risks associated with the long-run financing of relatively new technology long-run investment projects are significantly reduced. With public sector financing committed, the interest rate would be brought to a minimum.
Cheap borrowing by the National Investment Bank could be used to leverage in private finance from big and small business, from communities and individuals. It would be a much more cost effective way of ensuring we have the strategically planned infrastructure we need to keep the lights on and cut carbon – while avoiding passing on all of the costs onto consumers via energy bills in what is effectively a regressive tax at a time of exceptionally low borrowing costs.
Backed up by a clear, long-run policy commitment to finance renewables, the policy risk would also be reduced to a minimal level. And given the expectation from the Committee for Climate Change of significant cost reductions in both wind and solar PV, alongside other renewable technologies, we can assume that the policy mix allows the cost of capital to be significantly reduced back towards the standard Treasury costing model.
This places our own estimates for costs at the lower end of the CCC modelling, implying no significant additional costs to households from the transition to low-carbon electricity production.
Reducing costs for consumers
Indeed, where households are able to introduce the ‘flexitricity’ and demand management measures that National Grid now foresees as holding immense potential for UK households, and the more standard demand abatement of housing insulation, UK households could reasonably expect to save significantly on their current household energy expenditures.
The total installation costs are therefore towards the lower end of the CCC estimates, approaching £167bn in total for a major shift towards renewables in the UK. Researchers forecast a very high rate usage and effectiveness of these techniques, sufficient to help reduce household demand for energy use by around two-thirds by 2030. This is, in turn, sufficient to deliver 85% of the UK’s electricity from renewable sources with security of supply.
We would also introduce a Clean Power Mechanism to replace the Capacity Mechanism would bring a ‘carbon merit order’ into capacity auctions. It would first take demand-side (reduction and response), then low-carbon, then high carbon. This could be backed up by a publicly-owned strategic gas reserve, to improve efficiency and reduce costs.
Smart Grid technologies also promise cost savings. One estimate is that they will reduce the cost of additional distribution reinforcement by between £2.5 billion and £12 billion by 2050.
At least 65% renewable by 2030, and over 300,000 jobs
Research for the Committee on Climate Change carried out in 2011 implies that a 65% renewable electricity target is technically feasible for the UK, as long as interventions are made by government to improve supply chains, and deliver investment.
Our industrial strategy aims to do exactly that, using procurement to actively bolster UK supply chains, and delivering the investment funds cheaply and as needed. We have therefore allowed for a 65% renewable electricity mix by 2030, with the ambition to go much further than this as new smart-grid technology diffuses and households switch to lower-carbon energy.
Our plans for a rapid expansion in renewable energy imply over 300,000 new jobs created in the sector, based on estimates on job creation from from numerous independent sources. In each case, it is clear that rapid deployment will be achieved with maximum effectiveness where government is prepared to intervene to support local supply chains.
The renewable energy sector is much more labour intensive than the fossil fuel sector, according to a study by the authoritative UK Energy Research Centre (UKERC). They calculated that on average, electricity from fossil fuels creates 100-200 gross jobs per terawatt-hour (TWh) generated.
In comparison, electricity from wind creates 50-500 gross jobs per TWh, and solar creates 400 – 1,100 gross jobs per TWh. Energy efficiency projects also create many more jobs than dirty energy, coming in at 300 – 1,000 jobs per TWh saved.
In addition, the Centre for Economics and Business Research estimated in 2012 that a drive to offshore wind use could lead to a £22.5bn net export benefit, from both manufactured exports and exports of excess capacity. This is more than 70% of our current account deficit.
No more lagging behind
We will also launch a publicly funded National Home Insulation programme that would see at least 4 million homes insulated to energy efficiency standard B or C in the first term of a Labour Government – creating tens of thousands of jobs across every community, reducing the need for expensive new energy generation, and helping millions of people to save money on their bills.
Our programme will include building a million new homes – including half a million council houses – to ‘passive-haus’ or energy-plus standards. And to end the misery of cold rented accommodation we will set a minimum ‘B and C’ energy efficiency standard for all rented housing by the end of the first parliament.
Our National Home Insulation programme will cost the government between £1.8 and £2.8 billion a year. However, it will save UK households a total of £4.95 billion a year – while also returning £1.27 in tax revenue for every £1 invested by government.
It will increase the country’s GDP by £13.9 billion a year by 2030. Further, it will reduce gas imports by 25%, boosting energy security, according to analysis done by Energy Bill Revolution, a coalition of businesses and other stakeholders that commissioned the research.
Accelerating Britain’s green and prosperous future
Under this Conservative government, Britain risks missing its Paris climate targets, its EU renewable energy targets, and being left behind in the world’s fast-growing low-carbon market. This is a situation I am determined to reverse.
We will accelerate the transition to a low-carbon, renewable economy, and drive the expansion of the green industries and jobs of the future, using our National Investment Bank to invest in public and community-owned renewable energy. We will put modern low-carbon industries at the heart of our £500 billion investment strategy.
We will restore business confidence through coherent, consistent policy that champions the innovators and puts Britain, our cities, our devolved governments and communities at the forefront of this new industrial revolution. This is the Britain I want to build: a future that is cutting-edge, inclusive and sustainable.
Jeremy Corbyn is Leader of the Labour Party.
This article is based on extracts from Environment & Energy, a Labour Party policy paper by Jeremy Corbyn. Please refer to the original full version for additional material and references.