KPMG sponsored Energy report branded 'shoddy nonsense'

by Jessica Shankleman

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05 Mar 2012

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THE GOVERNMENT and renewable energy businesses have slammed the findings of a controversial report that claimed 2020 carbon reduction targets could be achieved more cost effectively by building nuclear and gas-fired power stations instead of wind farms.

The report, Powerful Targets, launched by independent consultancy AF Consult yesterday, was based on a study originally developed with KPMG last year - which formed the basis of a number of media reports attacking the cost of renewable energy, Accountancy Age's sister publication BusinessGreen reports.

As revealed by BusinessGreen, KPMG subsequently refused to release the full findings over concerns they were "ripe for misinterpretation", after the methodology was attacked by green groups, including trade body RenewableUK.

The full report by AF Consult has been published independently from KPMG and contains starker findings than the initial paper.

While the preliminary report suggested that ditching plans for a massive expansion in wind power capacity in favour of nuclear and gas could save the UK £34bn, AF Consult estimates this figure at £45bn.

However, the government and green energy firms have today dismissed the findings on the grounds the methodology was too simplistic and failed to consider the full lifetime and operating costs of new conventional power plants.

A spokeswoman from the Department of Energy and Climate Change (DECC) said AF Consult's analysis was "short-sighted" because it suggested the UK could obtain all its energy from two sources, rather than a diverse portfolio of technologies.

"The report's assumptions are so flawed the conclusions are near pointless," she said.

"AF aren't planning for enough generation capacity; they're putting all our eggs into just two energy technology baskets and keeping their fingers crossed that gas prices come good."

"If this sort of short-sighted analysis informed our policies, we'd not meet our carbon emission targets and keep the lights on, and the consumer would certainly be worse off."

She added DECC's chief economist, energy director general and director of strategy all agreed the report was "a very, very poor piece of work", on the grounds that it disregarded four key factors – that electricity demand would increase, diversity of technology is crucial to the future energy mix, renewable energy costs are being driven down and that gas prices are uncertain.

"AF don't appear to understand the point of our renewables target. It is an industrial policy aimed at accelerating reductions in the costs of renewable generation."

She maintained that while the government was concerned about the rising cost of consumer energy bills, it was also keen to develop a sustainable energy mix.

"The bargain basement is not the place to look for a responsible long-term energy strategy," she added. "All credible analysis agrees that renewable energy has a central role to play in the low-carbon technology race."

However, AF Consult insisted its report was not designed to inform policy, but was examining the lowest cost way of meeting the UK's target to cut greenhouse gas emissions by 80% by 2050.

A spokeswoman from AF Consult said the report was entirely its own, and KPMG had no involvement in it.

"We did collaborate with them at an earlier stage, but they chose not to proceed for reasons that they have already clarified in a press release," she told BusinessGreen.

The report was also given short shrift by the wind industry. Dr Gordon Edge, director of policy at trade body RenewableUK, argued the report was too simplistic to contribute meaningfully to the current debate around the UK's future energy supply.

"Bringing this wilfully narrow report back from the dead fails to bring anything worthwhile to the current energy debate," he said.

"KPMG has been wise to distance itself from the study and its findings as the extremely simplistic approach it uses bears little relation to reality, simply translating a set of assumptions into a particular conclusion."

Dale Vince, founder of independent green energy company Ecotricity, said the report was "shoddy nonsense" and should never have been published.

"The fact that KPMG have refused to put their name on this report is a damning indictment," he said. 

"KPMG have cited the sheer range of numbers and conclusions that can be drawn from the report, and their fear that it is thus likely to mislead or perhaps be open to abuse, as I believe has already happened.

He said the key claim that the UK can meet carbon targets in 2020 with an investment in new gas and nuclear generators instead of renewables "flies in the face of some stark realities".

He argued that no new nuclear generators could be commissioned by 2020 and said the study ignores the fact that because of rising gas prices some generators have turned to cheaper coal.

"Britain has precious little oil and gas left, as does the world. We need to harness our indigenous sources – the wind, sun and sea. That is the only sensible long-term investment," he added.

"This report is shoddy nonsense, and should never have seen the light of day."

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