Green energy giants join calls for Osborne to drive green growth

Seven of the world's largest energy and engineering firms have joined calls for chancellor George Osborne to restate his support for the green economy and authorise the inclusion of a decarbonisation target for the power sector in the upcoming Energy Bill.

The Times newspaper reported this morning that it had obtained a copy of a letter to energy and climate change secretary Ed Davey from Siemens, Alstom UK, Mitsubishi Power Systems, Areva, Doosan, Gamesa and Vestas, warning that while they see "potential for significant further investment to support the UK's move to low carbon-power generation", this investment will fail to materialise if the chancellor does not take steps to address the high levels of political risk afflicting the energy sector.
The group highlights how the high-profile row over renewable energy subsidies between the chancellor and the Department of Energy and Climate Change (DECC) and speculation that future support for low-carbon generation could be rationed have forced them to "reassess the level of political risk in the UK". Significantly, chancellor George Osborne, as well as prime minister David Cameron and deputy prime minister Nick Clegg, are copied into the letter.

The group concludes that "a binding 2030 target for power sector decarbonisation would help to reduce the political risk currently associated with long-term UK industrial investment", adding that it would also "help to provide the long-term view needed to build alliances and supply chain relationships required for cost reduction and opportunities for local content".

The Times story, which ran under the front page headline "Go green or we quit, firms tell Osborne", comes on the same day as more than 50 companies and NGOs, including Microsoft, Asda, EDF and Sky, released a similar letter demanding an end to uncertainty over the direction of the UK's energy policy and the inclusion of a decarbonisation target in the upcoming Energy Bill.

The dual intervention will further increase pressure on Osborne as he prepares to deliver his keynote address to the Conservative Party conference this morning, a year on from the speech that sparked much of the political uncertainty surrounding green policies with comments suggesting environmental rules represent a "burden" and the UK should not lead global efforts to cut emissions.

It will also strengthen the hands of the Lib Dems and green Conservatives as they prepare for a debate with the Treasury this autumn over whether to include the increasingly totemic decarbonisation target in the Energy Bill.

Over the summer it emerged that Osborne was opposed to the decarbonisation target on the grounds that it could undermine investment in new gas capacity. However, the independent Committee on Climate Change has said there should be a binding target for 2030 and both the Lib Dems and Labour have said they want to see a target included in the Energy Bill. Moreover, growing numbers of businesses have now confirmed their support for the target, while the CBI revealed last month that it would not oppose the inclusion of a target in the Energy Bill, as long as it served a clear purpose and did not distract from other issues in the bill that still need resolving.

However, Osborne can also call on supporters for his plan to turn the UK into a "gas hub", a strategy that the gas industry argues represents the most cost-effective means of dealing with the looming energy gap, which was again highlighted by regulator Ofgem last week.

Davey and Osborne are expected to lead negotiations on the final draft of the Energy Bill in the coming weeks, with Davey hinting last week that a compromise might be possible, based on a more "flexible" decarbonisation target that could change slightly as more information on the cost and viability of different low-carbon technologies emerges.

Friends of the Earth's director of policy and campaigns Craig Bennett said the two letters left George Osborne "totally isolated in his damaging dash for gas".

"Leading politicians from all parties, top businesses and even the companies building new power stations have all called for a binding target to green our electricity by 2030," he added. "These firms have given a clear and resounding signal of the reassurances they need from government to enable them to invest in UK energy in the future."