Osborne blocks Davey bid for wind power subsidies as Energy Permanent Secretary quits

By Paul Goodman
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• The Financial Times (£) reports this morning that George Osborne "is blocking a new subsidy regime for renewable energy".

• Ed Davey, in the meanwhile, "wants to prioritise renewables".

• David Cameron and Nick Clegg "have been unable to strike a compromise".

• Meanwhile, the Guardian has the news that the Energy Department's Permanent Secretary has quit.

• The Department claims that "her departure is entirely of her own choosing – four years is generally considered the norm for a permanent secretary".

• However, the paper claims that "such a high-profile resignation is unusual...The Guardian understands that Davey's relationship with Wallace has been uneasy since he replaced [Chris] Huhne".

• It also writes of an "impression of turmoil in the Department" and department "policy fiascos, such as the reversal over subsidies for solar power, which provoked a crisis in the solar panel industry, and strong criticism of proposed reforms to the electricity market, as well as a continuing row with the Treasury over cuts to wind energy subsidies".

The nub of the Osborne/Davey clash is that the Chancellor believes that in the balance between lower energy bills and lower carbon emissions the former should win out.  He wants to link the renewables policy to decisions on gas so that there is “a credible and certain framework” for investment in both.  The Energy Secretary accepts the case for a ten per cent cut in the subsidy for onshore wind farms; Mr Osborne wants a bigger reduction.

His leadership ambitions will want to march in step with the instincts of Conservative MPs; a hundred of them recently signed a letter urging cuts in onshore wind farm subsidies.  Mr Davey is fighting his corner for LibDem activists; as a separate piece in the F.T today notes, unless gas plans can "be fitted with still-nascent carbon capturing technology, the UK could miss its climate targets".

As I have pointed out before, the Energy Secretary's own Climate Change Calculator demonstrates that if Britain's energy needs are to be met and emissions reduced - and security of supply buttressed - there is no substitute for a big expansion of nuclear power: shale gas should also have a role to play.  Tony Lodge has argued recently on this site that "the priority should now be to deliver the new build of atomic plants and to re-examine a carbon price floor which will prematurely force coal out and encourage a greater reliance on gas than relative prices warrant".