Renewable energy in the recession

By Barney Rhys Jones, Managing Director, Good Energy

Historically, recessions have not been good for the environment. When money is tight, concern about pollution, deforestation and the changing planet tends to slip from political and commercial agendas. In the past this has been a particular setback for the renewables industry.

You don’t have to be an economist to understand why. When there is less money to spend, people stop spending money. They also turn the lights off when leaving the room. So as well as less available funding, there is less demand for energy, and less need for new energy sources. As the demand for coal drops, so does the price, and generating electricity the old way becomes cheaper. With less money around, the cheap way wins.

The pattern appears to be repeating itself in the current slowdown, with some big power companies suggesting they may have to shelve some large renewable energy projects in the UK. Amongst them is the planned London Array - potentially the world’s largest offshore wind farm, to be built in the Thames Estuary.  Securing funding for ambitious plans such as this will be an important symbol of hope or dismay for the UK renewables industry. 

Will this recession be any different?

Perhaps. Unlike before, climate issues are now firmly on the global agenda, with a strong sense of urgency. Not only that, but optimism is growing about the opportunities that green industries offer in these difficult times. Environmental concern used to be something we would focus on when the economy was fixed. Now it is something that could fix the economy.

As Hillary Clinton so elegantly put it this week "never waste a good crisis."

Green New Deal

One route out of the global economic slump which is gathering public support is the Green New Deal - a take on President Roosevelt’s applauded route out of the 1930s financial slump. The idea is that spending on the green industry will generate new jobs and new technology, becoming a reliable source of investment and alleviating our dependence on oil and gas. If governments want to spend their way out of this crash, the renewables industry and ‘clean tech’ are brimming with win-win opportunities.

President Obama is a key driver of the Green New Deal and so far has managed to keep to his pre-election promises of bringing the climate centre stage. Some $60 billion of his $790 billion economic stimulus bill has been designated purely to growing the clean energy industry. From grants, efficiency programmes, research and development to manufacturing, the US will receive a huge boost to fulfil Obama’s intentions for a speedy doubling of its renewable capacity.

Governments around the world are watching intently, and some have notably already followed suit. South Korea has assigned $24 billion of its $36 billion recovery package to green initiatives (that’s a staggering 3% of its GDP) and China one third of its $580 billion effort. Perhaps most surprisingly of all, in an attempt to diversify skills in preparation for life post oil, a huge amount of investment in renewables is coming from the oil-rich nations of the Middle East. 

Our own government has yet to make the same bold moves.

EU pressure

Fortunately, and perhaps surprisingly, the EU is playing a key role. In a bold and welcome move the EU recently said the UK must produce 15% of its electricity from renewable sources by 2020 in our new Renewable Energy Target. If we HAVE to produce 15% of our electricity from renewables, we HAVE to invest serious cash over the next 11 years. This will take a seismic shift and at the moment feels daunting, but with a clear path ahead we can at least see how to start tackling the problem. The EUR500 million of grants available from the EU should help to kick start things.

Recognition is also growing that we need to wean ourselves off our reliance on imported fossil fuels  - the 2008 spike in electricity and gas prices was as uncomfortable for the government as it was for consumers.

This pressure is bound to ignite the green energy industry in the UK and get renewables back on track.

Other reasons to be cheerful

Global announcements of new eco-developments are still coming thick and fast. Even before Obama’s stimulus package was signed, the US state of California granted planning permission for the world’s largest solar farm with a huge 1300MW capacity, trumping China’s announcement of investment in a 1000MW farm just a month before. In India and Kenya new large-scale wind farms have secured funding, not to mention the speeding up of investment into wave power trials around the world. Of course the sector has slowed, as any turbine or solar manufacturer will vouch for, but while other long- established industries are crumbling, the renewable sector is expected in many quarters to show resilience and remains a good bet.

Replacing Kyoto

And then there’s Copenhagen. December 2009 sees the UN summit to replace the Kyoto protocol. Some 15,000 delegates, including major heads of state, top scientists, NGOs and economists will meet to lock heads at what is regarded as our last chance to avoid devastating climate change. This is probably the single most important meeting of our lifetimes.  Bold decisions will need to be made, and solutions to be thrashed out.

 Over recent years renewable energy has proved itself to be a cost effective low-carbon solution, and is bound to receive further support at the summit. The form it takes will become clearer near the time, but investment is likely to be pledged for exciting new generation and grid technologies alongside subsidies for expanding available renewable energy capacity. Either way the renewables industry should benefit significantly at Copenhagen and many organisations, including Friends of the Earth, will be lobbying to ensure that the actions and commitments resulting from this event are binding, practical and enforceable. 

We will be covering the Copenhagen summit onthis blog throughout the year.

Conclusion

There is vastly more renewable energy available to be harnessed in the world than the total electricity demand today. With traditional electricity production methods contributing more than 30% of worldwide carbon emissions, it’s logical to increase the output of renewables. Acting on this opportunity by generating clean, emissions-free energy will create millions of new jobs, reduce emissions and stimulate the worldwide economy. Failing to act will result in a global disaster.

That politicians are beginning to recognise this is the first step.  In the meantime the behaviour of the energy consumer remains critical in reducing demand and increasing pressure on the politicians not to allow the issue to slip off the agenda.

Visit www.goodenergy.co.uk to find out how you can switch your home or business to 100% renewable electricity.

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