If the Tories really want to be green...

... they should stop blowing hot and cold on renewable energy. Yet they are wedded to short-term thinking that will cost the country a fortune

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The Independent Online

The latest scare stories about the future of Britain's electricity supplies came just yesterday, as the Tories began gathering for their conference in Birmingham. Britain "to be hit by 70s-style blackouts within three years", said one headline. These might very well be dismissed as what Ed Davey, Secretary of State for Energy and Climate Change, called "noises off from the Tory right", but there is genuine concern about how we keep the lights on in the years ahead.

Three years ago, the answer was going to come from David Cameron's "greenest government ever", yet you would struggle to find anyone who thinks that's an appropriate epithet for the coalition now. The Chancellor and the Treasury have emerged as the main sources of scepticism about the benefits of the "green economy" as a way out of the current recession and as a sustainable source of growth for the next generation. It feels as if, in the face of global economic bad news, the Chancellor has retreated to his party's comfort zone, supporting that which generated wealth in the past, while failing to encourage the development of an economy that will underpin prosperity for future generations.

The business world seems unimpressed. John Cridland of the CBI, in particular, has been scathing of the machinations of a government that he thinks has undermined business confidence and slowed down investment which could create growth and jobs.

As co-founder of Abundance Generation, an FSA-regulated financial service that allows ordinary people to invest directly in renewable energy projects in the UK, I have first-hand experience of creating new UK businesses, jobs and growth in the green economy. We work with projects funded by local communities and individual investors, where profits are recycled into the real economy. My view is that we are in danger of squandering an opportunity to revitalise UK manufacturing and the productive sectors via thousands of small, decentralised, local energy producers – something you would think would be close to the heart of the entrepreneurs' party. In Germany, 51 per cent of renewable energy production is owned by independent, community-based companies. The contrast with the UK could not be more marked.

This political short-termism will have damaging longer-term consequences for the UK economy. For every success we have had bringing new projects to market, there are several that have been delayed or even halted by political posturing and confused, conflicting signals about our direction of travel. Making energy a question of political judgement rather than economic evidence creates uncertainty. Businesses need reassurance that when the wind changes, as it were, the policy won't. Without that confidence, investment in renewable energy is held back – despite the fact that repeated research shows that both urban and rural populations favour the development of renewable energy.

There is solid evidence across the world of the benefits of investing in renewable energy. The UK is hugely fortunate in its natural resources. We have a vast resource of wind and solar power (before we even mention marine) which, as the National Grid has pointed out, if developed on current targets would allow us to be a net exporter of renewable energy to our more landlocked and crowded European neighbours by the mid-2020s. So why is it that Germany rather than Britain leads the way on renewable energy production?

The Germans have proved that electricity generated from a "free" resource such as the wind, even if it is intermittent, reduces energy prices. While Ireland, which has suffered more than most from the financial crisis, last year generated more savings from its extensive investment in renewable energy than it spent in subsidies.

In Germany and Ireland, they laugh at how our narrow political considerations are hampering badly needed investment. It is true that wind and solar require substantial capital investment – the costs are coming down, but are still higher than for, say, gas – but the long-term expense of buying the fuel, and the volatility of its price, must also be taken into account. With wind, by contrast, for the foreseeable future, the costs will fall predictably and steadily.

That is what the subsidies are designed to do: bridge the gap between where renewable energy is now and a future when it will be able to compete on a level playing field with more established energy sources. (Earlier, they benefited from tax incentives and direct subsidies for the same reason.)

Germany will reap a real dividend in competitiveness when its subsidy regime begins to unwind in 2037, and a significant proportion of the "fuel" for its electricity is provided free by the wind and sun. We seem to be unable to think in those terms politically, yet each year of delay burdens our future economy. And that is quite apart from the lost legacy for our children as we burn their precious resources for the sake of short-term savings and profits.

Anyone who can remember the constant political tinkering with monetary policy in the 1980s and early 1990s will also recall how uncertainty about interest rates undermined the confidence needed to grow the economy in the long term. Eventually, politicians had the maturity to deprive themselves of the right to make decisions about money supply. Surely now is the time, when so much is at stake, to remove another crucial issue from the game of party politics. This could be achieved by creating an Energy Policy Committee, accountable to Parliament for meeting certain targets on the environment and long-term energy costs.

The UK has a wealth of renewable energy resources, but unlocking that wealth requires policy that looks to the long-term health of the economy not the short-term perspective of party politics. If David Cameron meant what he said about the green economy, wouldn't that be a good place to start this week?

Bruce Davis is co-founder of the peer-to-peer loan service abundancegeneration.com