Time to stop experimenting with UK renewable energy policy

This paper is concerned with the case for supporting renewable energy deployment and which policies are most effective. It draws upon analyses of innovation and the lessons that can be drawn from comparing UK and wider international experience. The paper starts by re-examining the rationale for supporting technologies beyond the demonstration stage. It finds that there is a compelling case for policy intervention in order to gain various benefits associated with increasing returns to adoption. It argues that in the absence of intervention renewable energy technologies are unlikely to make progress, and that generalised support alone (for example in the form of a carbon tax) is unlikely to be effective or economically efficient means by which to create a learning space for immature technologies. Turning to the UK example the paper reviews the history of renewables support policies in this country and compares policies and progress here to developments elsewhere in Europe. Whilst the UK has made progress with renewables it has done so more slowly than others, at higher cost. The paper reviews the economic arguments put forward in favour of the UK Renewables Obligation (RO) and explains why despite its apparent advantages simpler, more investor friendly, schemes have been more effective in practice. The paper also considers the interrelationships between planning, grid connection and the forms of support the UK has chosen. The paper concludes that whilst the UK’s relatively slow trajectory with renewables can by no means be blamed entirely on the RO moving to a ‘feed in tariff’ type scheme would have benefits. The paper discusses a way forward for UK policies which minimises further disruption to investment, protects consumers and provides a more effective policy environment.