At last a sensible report:
But does it go far enough?
“The Committee examined the impact of the policies of successive governments on the electricity market. In its report the Committee identifies two key failures in the current market: the narrow amount of spare capacity, particularly in winter, and the rising cost of electricity to consumers and businesses. The Committee concludes that constant intervention by successive Governments in the electricity sector has led to a complicated, uncompetitive market that is failing consumers and businesses. The Committee highlights:
- Domestic electricity bills in Britain have gone from being second cheapest in Europe in the mid-2000s to the seventh cheapest today. Decarbonisation policies accounted for around 10% of the average domestic bill in 2013.
- Industrial electricity prices in Britain are amongst the highest in Europe. The Government has taken steps to compensate some energy-intensive industries, but it still estimates 13% electricity costs after compensation relate to decarbonisation.
- The growth of renewable energy, supported by contracts that guarantee a given price for a fixed period, has left the UK facing a possible shortage of capacity as private investors have not been willing to build new conventional power plants.
- The UK’s capacity margin is narrow. The Government introduced the Capacity Market in an attempt to reintroduce competition into the electricity sector. However, it is still struggling to procure new power stations.
In order to address the failures in the energy market the Committee recommends the Government should:
- Ensure that security of supply is always the first and most important consideration in energy policy. Affordability and decarbonisation must not be prioritised ahead of security.
- Ensure that decarbonisation is achieved at the lowest cost to consumers. This may mean waiting for the development of new technologies which can reduce emissions. The Government should make sure that the pace of reductions is flexible and not a rigid path to be achieved at all costs.
- Reduce and remove Government interventions in the market. The best way to do this would be to ensure that electricity generating capacity is secured through a single, technology-neutral, competitive auction for electricity supply. This auction would ensure that consumers are paying the lowest prices for low-carbon electricity.
- Establish an Energy Commission to provide greater scrutiny of energy policy decisions. This independent advisory body would report to the Secretary of State and advise on the best way for all the objectives of energy policy to be delivered.
- 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.
- In the light of the uncertainties remain about the Hinkley Point C nuclear power station deal, outline its ‘Plan B’ in the event the project is delayed or cannot produce the anticipated power.”
Lord Hollick has recorded a video setting out the key recommendations in the report. It is online here.
The full text of the report can be viewed here: