Merryn's Blog

Forget green energy – focus on efficiency

Expensively-subsidised schemes to get us using clean energy are a waste of time and money. We'd be much better off using dirty energy more efficiently.

At Glastonbury festival last weekend, I noticed the toilets were covered with stickers offering to send a Greenpeace postcard to anyone who texted their support. So Greenpeace's plan to save the environment is to use diesel-powered Royal Mail trucks to ferry pulped-up bits of dead tree around the country? Hmmm, not sure about that one.

Unfortunately it's just one of many instances where policy-makers and campaigners lose the plot as they rush to be seen as environmentally friendly.

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Another example was the last government's proposed £5,000 subsidy for electric cars. Sounds like a plan, until you consider that one of the two cars that would be eligible in 2011 is the £87,000 Tesla Roadster. Subsidising expensive sports cars to save the environment what's the point of that?

The commitment to generate 20% of the UK's electricity from renewable resources by 2020 is another of these mistakes. Except at an estimated cost of £100bn, it's not even remotely amusing. It's a laudable notion but it ignores the facts. Yes, Britain's creaking energy infrastructure needs an overhaul, and the country needs more power, but wind energy does not come cheap.

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A recent report showed that more than 20 UK wind turbines are working at a less than 20% efficiency rate. As a stand-alone venture, they would fall down. Yet under the 'renewable obligation' scheme, which in effect subsidises wind farm construction, consumers are paying almost double the price for this inefficiently-produced energy. This is even more galling when you consider that the UK has the most usable wind power in Europe.

There are lots more practical ways to cut emissions in the short-term. Improving our energy efficiency i.e. changing the way we use energy, rather than focusing on the way we produce it, could help a lot.

Almost two thirds of CO2 emissions come from buildings and industry, so although perhaps not quite as 'eco-cool' as fancy renewable projects, energy efficiency could be a lot more effective a lot more quickly. The good news is that some of this seems to have been taken on board by the coalition government, which announced last week that the Carbon Emissions Reduction Target (Cert) Scheme will be extended and will now focus more on home insulation.

We'll be discussing the future of energy and how to profit from it at our next MoneyWeek magazine roundtable discussion if you're not already a subscriber, subscribe to MoneyWeek magazine.

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