Greater energy efficiency target could deliver $100 billion boost to UK economy

A recent report by economic modeling specialists Cambridge Econometrics has outlined a scenario whereby the U.K. could boost its economy by £62 billion ($99 billion) and create 40,000 new jobs by 2030 – if it agrees to a 40% cut in energy use over that period.

The study, commissioned by the WWF-UK to assess the impacts of climate change mitigation measures on the U.K., found that even a lower target of 30% energy efficiency measures could boost the economy by £17.3 billion ($27.6 billion) and create an additional 13,000 jobs as opposed to doing nothing.

The U.K., along with Poland, has consistently resisted efforts by the European Commission to impose binding energy reduction targets, citing that such a move would be bad for business. However, this modeling would appear to suggest that the opposite would be the case, underlining the positive impacts wrought by engineering the economy to use less energy.

"The benefits of energy efficiency are impressive and we need to be ambitious," Brook Riley, Friends of the Earth spokesman, told the Guardian. "GDP gains are three times higher with a 40% reduction target than with 30%. It is significant that the countries that were hardest hit by the financial crisis – Greece, Portugal, Ireland – are among the strongest advocates of going as far as we can."

Calls to introduce a binding energy reduction target of 30% among EU member states have so far been dismissed by decision makers in Brussels, despite the European Commission’s readiness to introduce binding energy targets in other fields, namely a pledge by members to generate 30% of their energy from renewable sources by 2030, and to cut greenhouse gas emissions by 40%. Previously, EU member states were working towards a 20% renewables target by 2020, and a 20% cut in emissions by the same date, measured against 1990 levels.

Critics of these measures argue that these current goals will do little towards helping Europe decarbonize its economy by at least 80% by 2050 – a target the U.K. has signed up to reach. The issue of energy efficiency – consuming less, and consuming cleaner energy – is therefore seen as a significant outlier on each member states’ progress towards that 2050 target.

The current appetite in the U.K. is to aim below 28% emissions reduction due to perceived cost risks. However, appetite among the continent is growing for at least a 30% binding target, with many environmentalists pushing for more.

Solar PV’s pivotal role

The Cambridge Econometrics report laid out a series of different scenarios for the U.K.’s future energy strength, among which solar PV was brought to the fore in each of them. The report suggests that solar power could become the cheapest energy source at scale by 2030, stating: "As renewable technologies develop it is likely that the perceived risk of investing in these technologies will fall, leading to reductions in the cost of borrowing and, therefore, a reduction in the cost of renewable generation."

The study’s model saw solar PV as the cheapest energy source by 2030 at just £11/kW per year ($17), compared to £24/kW for gas CCGT, £44/kW for onshore wind and £135/kW for offshore wind. Solar’s total capital cost (excluding borrowing) per year was a mere £630 per kilowatt ($1000), according to the study.

The report’s conservative estimate is that there will be 18 GW of solar PV capacity installed in the U.K. by 2030, according to the 4CB scenario, which is the most conservative model. However, last week the U.K.’s solar sector rounded on the government’s latest renewable energy subsidy changes, with the Solar Trade Association (STA) particularly critical of the Department of Energy and Climate Change’s (DECC) decision to prematurely strip large-scale solar of access to the Renewable Obligation (RO) scheme.

"Solar has been the rising star in the coalition’s renewable energy programme and has been championed recently by the Prime Minister at the UN and by Ministers at conference," said STA’s chief executive Paul Barwell. "Why is the U.K. government putting this industry’s incredible achievements on solar power at risk?

"To curtail its growth now is just perverse and unjustified on budgetary grounds – solar has only consumed around 1% of the RO budget."

The new budget of £300 million ($479 million) is higher than was expected, but these monies are to be funneled into the Contracts for Difference (CfD) scheme, which solar critics argue is geared towards less established, more expensive renewable sources, such as offshore wind and tidal power.

"The allocation process is still too risky and complicated for most of the renewable energy independents and SMEs that are trying to break into the U.K.’s consolidated energy market," added Nina Skorupska, chief executive of the Renewable Energy Association (REA).