Friday, 9 December 2016

If we had a referendum on renewables

This chart shows public attitudes to renewables and fracking [1] alongside the Brexit referendum results [2]. We are much more positive about renewable energy than we were about Brexit. This is despite the costs of subsidising renewables (which we overestimate) and despite negative newspaper stories. The oil and gas industry is now a net loss for the treasury and the government is finding ways to tax renewables.

Attitudes to renewables energy compared with the referendum results [1][2]

Net support (support minus opposition)
Offshore windOnshore windBiomassSolarWave and tidalNuclearFrackingBrexit

The government has doffed its cap to brexiteers but rides roughshod over opinion against fracking.
Brexit got 3% more votes than leave (counting people who didn't vote as neutral) and the government has doffed its cap to the will of the people. When it comes to fracking, anti gets 17% more votes than pro, but the government carries on regardless. Instead they try to change our minds by offering community benefits or even cash payments to local residents as compensation for fracking wells [3].

Solar is the most popular even though we think it costs about 20 times as much as it does.
Support for solar is the highest of all even though most people seem to think it costs a lot more than it actually does. A YouGov poll last year asked people to guess how much of our electricity bill is due to solar power. The average guess was £196/year. Actually it is £9/year [4].

The net support for wind is not quite as strong as for solar but it is still very high, with offshore wind more popular than onshore. Again, money doesn't seem to come into it because offshore wind costs a lot more than onshore.

Wind power is popular despite negative comments in print media.
It doesn't seem to have an awful lot to do with the newspapers either, and even less to do with commentators. News about wind power in print media tends to be slightly negative while commentators (comment pieces and editorials) are decidedly negative. The media is negative about fracking too, but in that case the commentators are more positive than the general news [5]. It seems that the politicians are not the only people out of touch with popular opinion - newspaper editors are too.

BEIS supports oil and gas by paying for exploration in the North Sea.
The Department for Business, Energy and Industrial Strategy is determined to make the most of our oil and gas resources. They have created a new independent regulator, the Oil and Gas Authority, to support the industry [6]. For example, they are channeling funds through the OGA for seismic exploration in the North Sea to find new fields [7].

The oil and gas industry doesn't bring in big tax revenues any more.
North Sea oil and gas have been an amazing money spinner for the treasury in the past with massive special taxes in addition to normal corporation tax. However the industry cannot afford these any more. Petroleum Revenue Tax was reduced from 50% to 35% in 2015 - but now 0% is proposed. A supplementary charge of 30% on ring fenced profits went down to 20% in 2015 and now 10% [8]. Last year the industry received more in subsidy than it paid in taxes [9]. Perhaps our government hopes that fracking will at least partly replace this revenue stream.

Taxes on rooftop solar are set to rise, penalising businesses that use their own green power.
The government has managed to find one way to raise revenues from renewables. Rooftop solar pays tax indirectly via business rates - these are set to increase due to revaluation in 2017. This affects businesses that use their own power and that have already installed panels as well as new installations. The rateable value for panels is expected to increase by a factor of 6-8. For a typical 100kWp roof this means a rates bill increase from £400 to £2700 [10]. Sainsbury and IKEA are among businesses have joined the Solar Trade Association to protest against these increases [11]. Sainsbury has panels on over 200 supermarkets and other buildings [12].

When renewable businesses are allowed to thrive they pay more tax naturally
Slapping extra taxes on renewables slows industry growth and reduces revenues. If it is allowed to thrive, revenue from profits and employee income tax will increase. For example, Siemens's new factory in Hull has just produced their first wind turbine blades. The factory is expected grow to 1000 jobs so that is 1000 more lots of income tax [13].

The oil and gas industry is dwindling and is already a net loss to the treasury. Fracking could revive it but the public don't want fracking. If the government respects the electorate and allows the renewables industry to grow it will, in time, bring in respectable revenues.

[1] Public Attitudes Tracking Survey: Wave 19 ( Oct 2016
[2] EU Referendum Results (Electoral Commission)
[3] Households could get fracking payments under government plans (BBC) August 2016
[4] British public vastly overestimate solar support levels, poll finds (PV Magazine) November 2015
[5] An analysis of UK press coverage of onshore wind and fracking (10:10) Oct 2016
[6] Date announced for more powerful Oil and Gas Authority ( Aug 2016
[7] OGA issues contracts to extend frontier seismic database (Oil and Gas Authority)
[8] Oil and gas taxation: reduction in Petroleum Revenue Tax and supplementary charge ( Mar 2016
[9] British Government makes a loss in North Sea oil and gas production for the first time in history (The Daily Record) May 2016
[10] STA secures concession on business rates but self-consumers remain at risk (Solar Power Portal) Sep 2016
[11] Sainsbury’s, IKEA among big firms calling on government to stop solar tax hike (Solar Power Portal) Jul 2016
[12] British supermarket chain will have 40MW of rooftop solar by 2015 (Treehugger) Oct 2014
[13] Hull's Siemens factory produces first batch of wind turbine blades (Guardian) 1 Dec 2016

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