Energy and Environment: News from the State of Euphoria

Let’s play a game. The rules are simple.

Imagine you’re the Minister of State with responsibility for Energy in a small country on the northern fringes of Europe. With apologies to David Lodge, we’ll call this country Euphoria. As a member of the newly elected Green-leaning government, your ministerial role is to deploy low carbon energy in this island State of Euphoria, whilst keeping the lights on.

In the frustrating days of opposition you were able to imagine a bright Green future of large-scale energy storage, tidal power around the coast of Euphoria, carbon capture and storage and a host of other technologies which haven't yet reached industrial-scale. You'll invest heavily in energy R&D, but now you’re in power, you need to deal in the reality of nuclear, gas and wind as the practical tools at your disposal (coal has long been killed off by EU directive). The key question is how much of each?

Are fossil fuels subsidised more than renewables?

The International Energy Agency made the news with the headline claim that fossil fuels attract six times the subsidy of renewable energy. Inevitably, the headline was picked up and repackaged by most NGOs, trade bodies and commentators into a simple message - big oil is dipping our pockets to make a fast buck at the expense of clean energy.

However, like most headlines, when unpacked the reality is somewhat different. For example, according to the REN21 report, in 2010 renewable energy accounted for a little over 15% of global energy consumption, compared to 80% for fossil fuels. However, approximately half of that renewable consumption was traditional biomass, the global poor burning wood and animal waste with appalling health impacts. Discounting long-standing hydro and (mostly) Chinese solar water heaters, new renewables such as wind and solar PV accounted for less than 1% of global energy consumption, as did biofuels. So while it’s claimed that fossil fuels attract six times the subsidy of renewables, fossil fuels generate not far off 80 times more energy than heavily subsidised new renewables. Per unit of energy actually consumed then, renewables appear to attract subsidy over 10 times greater than fossil fuels.