Why investing in renewables can fix our balance of trade deficit
One of the problems our economy faces is our relative balance of trade with the rest of the world. In Victorian times, the UK produced more than 60 per cent of the global gross domestic product (GDP) and its goods (and what were then regarded as plentiful fossil fuels such as Welsh coal) were exported all over the world. In the 21st century, faced with the need for home grown growth to overcome global economic stagnation and crisis, the UK is well placed to reverse the decline in its balance of trade and start generating value by providing clean, renewable power to its neighbours.
How can renewable energy help the trade deficit?
Two sets of data were published last Thursday that highlight the important but often understated role that renewable energy can play in our future economy.
The first set of data was from the Office of National Statistics and shows how Britain’s balance of payments or trade deficit has unexpectedly ballooned to £20.8 billion. What this means is, we are effectively buying more things from overseas than we sell. It is generally understood that running a trade deficit over the long-term is a negative thing for a society because, put very simply, money flows out of the economy and is accrued in other countries.
On the same day, the National Grid published its UK Energy Futures Scenarios and this analysis demonstrated that if the UK stays on track with achieving its renewables targets the country could be a net exporter of energy by early 2020. To put this in context, currently between 25-30 per cent of our primary energy is imported. Rectifying the energy trade in balance would go a long way rebalancing our national trade imbalance and put UK plc on a much firmer footing internationally.
How can Britain become a net exporter of renewable energy?
The UK wind, tidal and wave resources are the envy of the world. The interconnectors between Europe and ourselves exist or are being built. If we continue to invest and ensure the rapid expansion of our renewable energy industry, we will reap significant economic benefits as we move into the next decade.
It is worth remembering that, in the summer, Germany is now a net exporter of solar energy to France, reflecting production problems from France’s ageing nuclear generators.
Investing in UK renewable energy production is a positive first step towards the re-building of the UK economy to be more self-reliant and less dependent on the vagaries of the global economy and financial markets.
On balance, it makes sense to invest in the UK green economy.