Higher energy bills result of government intervention

A House of Lords report has claimed that successive governments have failed to encourage enough fresh power capacity in the UK, and a new energy commission should be commissioned.

The Price of Power: Reforming the Electricity Market, the report by the Lord’s Economic Affairs Committee, examined the impact of the policies of successive governments on the electricity market and identified the narrow amount of spare capacity, particularly in winter, and the rising cost of electricity to consumers and businesses as the two key failures.

Industrial electricity prices in Britain are amongst the highest in Europe, with it estimated that 13 per cent of electricity costs after compensation relate to decarbonisation. The growth of renewable energy has left the UK facing a possible shortage of capacity as private investors have not been willing to build new conventional power plants.

In order to address the failures in the energy market, the committee recommends that the government should: ensure that security of supply is always the first and most important consideration in energy policy; ensure that decarbonisation is achieved at the lowest cost to consumers; reduce and remove government interventions in the market; establish an Energy Commission to provide greater scrutiny of energy policy decisions; and create a world-class National Energy Research Centre which would search for new methods of producing cheap, clean energy and translate them into commercial applications.

Additionally, the committee urges the government to outline its ‘Plan B’ in the event Hinkley Point C is delayed or cannot produce the anticipated power - going further to argue that ’it does not provide good value for money’ for consumers and there are ‘substantial risks’ associated with the project.

Lord Hollick, committee chairman, said: “Poorly-designed government interventions, in pursuit of the decarbonisation, have put unnecessary pressure on the electricity supply and left consumers and industry paying too high a price. Domestic electricity bills in Britain have gone from being second cheapest in Europe in the mid-2000s to the seventh cheapest today. Britain’s high industrial electricity prices have led some energy-intensive industries to relocate abroad. Low-carbon policies are a factor in these high prices.

“The government must make sure that the security of the UK’s energy supply is the priority of its energy policy. Affordability must not be neglected and decarbonisation targets should be managed flexibly.

“Renewables play and will continue to play a crucial part in energy policy. Costs have been reduced and efficiency has improved. New clean technologies must be supported to be commercially viable. A new National Energy Research Centre would also help the UK to catch other countries up in the race to find cost-effective solutions to the challenges the world faces on energy.”