Powering down: Clean energy cuts and the wider economy

Will support cuts for Britain's low-carbon industries damage the economic recovery?

By Matthew Aylott

Information on this page correct as of:

By Dr Matthew Aylott, Energy Analyst

Recent changes to support for clean energy schemes should not come as a surprise given the government’s desire to rein in charges levied on people’s energy bills. But in making the changes, does the government risk damaging the UK’s economic recovery?

Rooftop solar faces huge subsidy cuts from January 2016. Image: Creative Commons license
Rooftop solar faces huge subsidy cuts from January 2016. Image: Creative Commons license

The cuts to subsidies for solar photovoltaics, onshore wind, renewable heat, energy efficiency and more, come at a time when the UK economic recovery has hit something of a brick wall, with unemployment levels rising again.

Despite this, the low-carbon economy has demonstrated that it is one area capable of bucking the trend. Low-carbon activities currently employ nearly half a million people in the UK, a figure that has been rising by around 4 per cent a year.

However, we now face the prospect that cuts will bring this growth to an abrupt halt. In its recent review of the changes to the feed-in tariff for rooftop solar, the government said that cuts would likely have a ‘negative impact on existing jobs’ but couldn’t offer an idea of how many would be at stake.

A simple calculation* based on government projections tells us this single policy decision is likely to result in the loss of some 17,000 jobs across the solar industry by 2020, which is more than twice the number currently employed by coal (mines and power stations combined) in the UK.

Ironically, the impending loss of jobs in the solar industry has received considerably less political and media attention than closure of individual generation sites such as Ferrybridge, Eggborough and Longannet coal-fired power stations, even though the numbers of people involved are much larger. Perhaps that is because the coal-fired stations are point sources and therefore in someone’s backyard, whereas the majority of solar job losses will come from small companies dotted all over the UK.

Powering jobs
Net number of jobs created per 100 gigwatt-hours of energy generated/saved. Source: ECIU
Net number of jobs created per 100 gigwatt-hours of energy generated/saved. Source: ECIU

But what is the outcome if Britain doesn’t build new renewable energy capacity? If instead we invest in more gas-fired generation (new coal is obviously off the map), then we are likely to see an overall decrease in the number of jobs. Evidence shows that renewable energy schemes create an additional 0.5 full-time equivalent jobs per gigawatt-hour (GWh) of energy generated as compared with fossil fuels.

To put this in context, the UK generates around 335,000 GWh of electricity each year, and around two-thirds of this comes from gas or coal. For every 1 per cent of our electricity that is generated from renewables instead of fossil fuels, we create an additional 1,675 jobs.

We can also create jobs by cutting energy use. Displacing demand for coal or gas-fired power with better insulated homes and offices will create an additional 0.25 full-time equivalent jobs per GWh of energy saved. Together the combination of renewable energy and energy efficiency sounds like a successful recipe for stimulating a flagging economy.

A recent report by the European Parliament Committee on Employment and Social Affairs suggests that renewable energy could create up to three million new jobs across Europe by 2030, with the potential for a further two million in the energy efficiency sector.

Need for stability

However, experts warn that future low-carbon jobs are conditional on the development of clear policy frameworks. Frances O’Grady, General Secretary of the Trade Union Congress (TUC), who represent the majority of trade unions in England and Wales, said: “The TUC has long campaigned for a just transition to a low-carbon future, delivering secure, skilled jobs in the right place at the right time.”

“But the Conservative government has announced at least 10 mostly Treasury-led green policy reversals that together have drawn widespread criticism from the industries affected, as well as stifling investor confidence and jobs growth, and slowing the pace of clean technology development.”

“Yet delivering the many opportunities for green growth, including offsetting the many jobs losses involved, requires a stable energy policy and an active role for government in developing a green industrial strategy at national and regional level,” she added.

The clean energy transition will come at a cost, and this has implications for the broader economy, for example by increasing the cost of living in the short-term. So driving down the cost of renewable sources of energy and ensuring policies deliver value for money are clearly important. But the evidence on jobs suggests that cutting support for onshore wind and solar photovoltaics is likely to hurt rather than help the UK’s economic recovery

* Jobs supported by solar feed-in tariffs currently around 18,570 based on DECC monthly installation figures and employment multipliers derived from UKERC analysis. Future jobs estimate based on projections from DECC Periodic Review of FITs 2015 – Impact Assessment (Central Estimate) and using employment multipliers derived from UKERC analysis.